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Kiwibank's home loan guarantee challenged

Kiwibank is again being challenged over its guarantee that its home loans will be cheaper than its major competitors over a six-year period.

Tuesday, August 14th 2012, 6:00AM 4 Comments

Kapiti-based mortgage broker Simon Rule says when it comes to mortgages with loan-to-valuation ratios (LVRs) above 90%, he can't see how Kiwibank's loans can possibly be cheaper.

That's because Kiwibank is still using an external insurer, Australia-based QBE, for such loans and charges low equity premiums of up to 4.18% on a mortgage with an LVR of 95%.

"Most banks charge a maximum of 1% of the loan amount borrowed as a one-off low equity premium," Rule says.

On a mortgage of $605,000 with a 95% LVR, Kiwibank can charge a one-off premium of up to $25,289 while ASB Bank would charge only $6,050, Rule says.

"There's no way you're going to be better off after six years. They should be putting on a disclaimer," he says.

However, Kiwibank spokesman Bruce Thompson the bank backs itself to make good on its guarantee and its history shows its has - the bank was launched in 2002.

"The bottom line is, if we don't measure up, we will pay. There is no risk. If you think it will be cheaper to go with Westpac, you should still go with Kiwibank because, no matter what, you will be better off with Kiwibank," Thompson says. Kiwibank has never had to compensate a borrower under the guarantee, he says. The guarantee applies to the four major bank's standard rates only.

With mortgages with LVRs above 95%, Kiwibank doesn't necessarily charge the full potential premium and, as with any new customers, usually offers a contribution towards expenses, Thompson says.

Rule questions why Kiwibank is still using the expensive option of an external insurer.

Thompson says Kiwibank doesn't have to explain why. "That is a business decision."

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Comments from our readers

On 14 August 2012 at 9:33 am alttab said:
It is a pretty much a Clayton's guarantee anyway - if you read the hoops you have to jump through to prove your case, you can see why Kiwibank has never had to make good on the guarantee. Excellent marketing though heh heh.

http://www.kiwibank.co.nz/personal-banking/home-loans/why-kiwibank/home-loan-guarantee.asp
On 14 August 2012 at 10:15 am Hamish said:
"Kiwibank has never had to compensate a borrower under the guarantee, [Thompson] says." That's not at all surprising. How are the vast majority of borrowers going to be able to check this? I wouldn't know where to start.
On 14 August 2012 at 10:18 am Claire Matthews said:
Simon Rule asks why Kiwibank is still using an external insurer. A better question would be why the other banks do not.
On 16 August 2012 at 11:41 am Darcy Ungaro said:
Good on you Simon! Finally someone else is talking about this and not just me - as a mortgage adviser I have done numerous calculations for clients and come to same conclusion - their guarantee may be accurate on advertised interest rates, but in no way is it cheaper based on overall costs including the low equity charges. Is this not clearly misleading advertising under fair trading act? I suspect that if it was an "Aussie" bank, the mainstream media would be all over this.

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 5.65 5.55 5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society ▼8.60 6.75 6.40 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 5.95 6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - 6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.49 6.49 6.49
TSB Special 7.89 5.69 5.69 5.69
Unity 7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.10 6.05 5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.02 5.79 5.69

Last updated: 20 November 2024 9:45am

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