Mortgage advisers should put greater emphasis on price: ComCom
Mortgage advisers should put greater emphasis on price while lenders need to improve and standardise their mortgage application systems, the Commerce Commission says.
Tuesday, August 20th 2024, 9:27AM 
4 Comments
In its final report on banking competition, the commission is also recommending that advisers should be required to submit multiple mortgage applications and that banks should stop using conversion rates for advisers.
“What we heard from consumers is that price really matters when it coms to shopping for a home loan,” commission chair John Small told an online media conference.
“Our investigation has also shown that often when using the adviser channel, only one offer is submitted,” Small said.
Advices have said they consider “a matching process between borrower and bank to be one of their primary roles.
“We definitely agree that mortgage advisers can add considerable value. What we're asking, though, is that they do more to promote price competition,” Small said.
“We recognise that requires some investment from banks as well.”
TMM asked whether submitting multiple applications and making banks stop using conversion rates would add costs to the process that consumers would ultimately have to pay.
“The reason why we're going down this route with mortgage advisers and banks is driven by things in Australia,” Small said.
The Australian industry is structured very differently from New Zealand, he said.
“We heard very clearly that it's possible with common data standards and technology platforms for banks to more efficiently consider home loan applications so that their costs of consideration fall and can enable better competition as a result,” he said.
“This is not something that we just invented. We learnt about it from the Australian experience.”
The commission still thinks the NZ banking market is a stable two-tier oligopoly and that competition isn't working as it should.
“What we see in NZ is that the major banks have little strategic differentiation and their growth targets focus on maintaining market share and protecting margins and profitability,” and the major banks are more profitable than in other countries.
“In a well-functioning market with strong competition, we'd expect to see more aggressive strategies to win customers from other banks,” Small said.
The commission has retained its major recommendations from its draft report published in May that the government should “consider what is necessary to make Kiwibank a disruptive competitor,” and that it accelerate and co-ordinate progress on open banking.
The government should provide Kiwibank with access to more capital.
“In the shorter term, capitalising Kiwibank appears to have the greatest potential to constrain the major banks and disrupt a market that is otherwise stable due to lack of competition,” the commission says.
It wants the government and the industry to commit to ensuring open banking is fully operational by June 2026 because “in the medium to long term, open banking has the greatest potential to promote ongoing disruptive competition for personal banking services,” it says.
It also recommends that the government itself should be an early adopter of open banking services such as supporting new payment methods for taxes, welfare and vehicle licensing.
The commission also recommends that the government should lessen barriers to switching home loan providers as part of its reforms of the Credit Contracts and Consumer Finance Act and that existing and future legislation should not unintentionally favour banks, particularly the larger banks, over other providers.
| « Consistency the key: ASB chief executive | Advisers reject ComCom emphasis on price, multiple applications » |
Special Offers
Comments from our readers
Government departments can't run themselves let alone a bank, sell, sell now.
Are they bonkers? In one swipe they raise the inefficiency of the industry by multitudes and increase operational costs on all providers.
This drives up the price not bringing it down for consumers. Seriously Com Com you have to do better than this.
I have no words on the basics of critical thinking failure here.
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
Mortgage advisers are one of the best examples of a profession operating in New Zealand today that clearly aids consumers in getting a good deal. Mortgage advisers by their definition are a competitive force for good for consumers seeking home loan finance from a bank/lender. The advocacy role that advisers offer consumers is backed up by the fact that 60%+ of Kiwis now routinely engage a mortgage adviser when securing a home loan. This illustrates that consumers clearly see value in what the mortgage adviser industry offers and to stick a cherry on top we are also 99 percent of the time a free service to customers been paid by the lenders. How many other industries offer such a great service to the consumer?
The Commerce Commission seems incapable of understanding the above. Those people saying that we should be patient with Commerce Commission officials on them understanding our industry and the role advisers play in adding competition need to think again sorry. This is just not good enough, and mortgage advisers are surely getting sick and tired now of Wellington bureaucrats and their lack of understanding of our industry. If the Commerce Commission had any understanding of what the banking industry and financial services actually needs to improve competition, they would realise that overregulation is the single biggest obstacle now to more lenders & insurers entering the New Zealand market.
Wellington bureaucrats and the regulation they currently produce annually are the single biggest obstacle to increased competition in the banking sector. The same also applies to other industries in New Zealand. We saw HSBC exit the New Zealand home loan market last year sighting this increased regulation as one of the reasons they were pulling out. Maybe the climate-related disclosure requirements introduced for large publicly listed companies, large insurers, banks, and investment managers was the final straw. New Zealand needs more main bank lenders operating not less as this will ultimately see more customers getting a better deal on their home loan.
As a small country we need to start having a serious conversation now about the amount of overregulation that has occurred and the subsequent impact it’s had on competition for Kiwi consumers, home loan customers included. Overregulation in New Zealand is preventing disruptive competitors from entering the market. Might be time for the Commerce Commission to wake up and get their heads around that fact. The NZ taxpayer pouring yet more money into Kiwibank is most certainly not the solution.
It looks like NZ consumers will have to wait until the new Ministry of Regulation is formed before they can then have a taxpayer funded Government organisation competent enough to assist in more competition been introduced in respect to the banking industry. The Commerce Commission clearly isn’t up to the task.