Floating rate rise riles customers
It’s not the demise of the National Bank brand which is getting borrowers talking to their brokers about switching banks, it’s a decision by another bank which is getting the phones going.
Friday, October 26th 2012, 6:00AM 6 Comments
Brokers spoken to by mortgagerates.co.nz say that Westpac’s decision to hike its floating rate by 15 basis points has got people talking about moving banks.
One well-respected broker, who wished to be unnamed, described Westpac’s decision as “insanely stupid.”
He says they should immediately reverse the increase.
Another described it as “nuts”.
Brokers spoken to couldn’t understand why Westpac has increased its floating rate when home loan rates have been flat or falling.
The logic behind Westpac’s move is unclear. One possible reason is that it is trying to shift customers to its fixed term rates.
However, it is generally considered that banks have better margins on their floating rate products, rather than fixed.
Another possible reason is to increase profits.
However, this seems short-sighted, the broker says, as it is disenfranching its most valuable customers.
He said it takes a lot for his clients to ring him and complain, but he has had numerous calls since Westpac made the decision.
We asked to speak to someone at Westpac about its pricing strategy and were furnished with the following written response: “Westpac's mortgage pricing approach takes into account the dynamics in what is a highly competitive market.”
“We aim to price competitively. In particular, our everyday floating rate is well matched to market. On fixed rates, we are priced competitively at short to mid terms.”
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Comments from our readers
Many Westpac customers only received their notice recently so probably weren't aware.
Secondly while media attention is on the ANZ NBNZ get together that is not what is getting borrowers attention. It's Westpac's decision to go up when everyone else is going down
P.S. I don't recall much flap when ANZ National hiked their revolving credit rate to 5.85% p.a. and none of the other banks followed them. Now that increase was really unjustified.
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Yes I agree. A silly even stupid move by Westpac but as any half decent mortgage broker knows there is plenty of scope for negotiation on floating (and fixed) rates at present with the banks. Westpac's advertised floating (Table) home loan interest rate is 6.24% p.a. currently but as brokers know (or should know) is very easily discountable to be competitive with the other banks. I have often asked Westpac why this rate is 0.50% higher than their competitors and they don’t seem to know why. The cynic in me says that Westpac wants its home loan customers to commit to a fixed rate but then all the banks are actively encouraging this at present.
Oh and by the way ANZ & National Bank (as they still exist when I type this email on Friday late afternoon) currently have the highest advertised Revolving Credit home loan rate of any main bank in New Zealand at 5.85% p.a.