KEY POINTS:
The cut-throat consumer banking sector moves into a new phase tonight, with the BNZ's launch of a new personal banking system it claims as a world first.
Seeking to move away from an image as more of a bank for businesses, the BNZ hopes its new TotalMoney creation
will help push its share of the home loan market from 16.1 per cent to 20 per cent.
TotalMoney allows family groups and couples to pool accounts, so all can earn a higher interest rate. All will be able to see each other's balances, but will not have access to the funds or be able to see transaction details.
It will also, for the first time, allow savings in one account to be "offset" against another person's floating home loan, forgoing interest, but making it quicker to repay the mortgage.
BNZ says the changing nature of family structures, evolving immigration patterns with larger connected family groups means the market is ready for such a change.
It says "intergenerational financial assistance" has also become more expected.
Rival banks are reluctant to talk in any great detail about the innovations or the pros and cons of the BNZ product. But there is a feeling the BNZ has a tough job on its hands explaining the complexities of this new grouping of accounts and the way offsetting actually works.
Eyebrows have also been raised at the fact TotalMoney is calculated to reward people for taking on floating rate mortgages. BNZ shook up the market with its two-year fixed "unbeatable" mortgages last year.
Some point to the new breed of high-interest accounts that also allow easy access to money, which the BNZ has yet to match.
BNZ says the new product is not an attempt to shift its new two-year fixed rate customers away from the market-leading low-margin home loans on to more profitable floating-rate mortgages.
Currently, just 15 per cent of New Zealand home loan borrowers have variable-rate loans. In Australia this figure is over 80 per cent.
This new BNZ consumer push comes as competition in the banking sector is running hot, with Rabobank this week announcing it has just passed the $1 billion mark in deposits and Westpac launching what it describes as a "green" home loan, which gives discounts on environmentally friendly products and services.
Westpac is also trying to attract business customers with "Business Online", which allows multi-user online access to business accounts.
Dr David Tripe, head of banking studies at Massey University says the BNZ is seen as needing to "rebuild its relationship with customers". There is a danger that people might be confused by the new product, he says.
"One of the things I find in looking at it reasonably carefully is that, in fact, to get any benefit on the loan you, actually, have got to be using their floating rate loan product. Now floating-rate loan products are at a significantly higher margin than fixed-rate loan products."
Tripe says research is being considered on the way people make decisions about their home loans. "We have some questions as to whether many of the people who use these sort of facilities actually do so properly.
"We aren't as comfortable as we'd like to be in terms of understanding what's going on there," he says.
"New Zealanders, as a whole, are fairly rational. The average fixed-rate loan is much larger than the average floating-rate loan. That's good, sensible risk management for customers because they realise that if they've got a large amount of debt they've got to fix the cost of that to protect themselves against variability."
Taking on more floating-rate loans makes sense at times like this, when interest rates are expected to drop further. Yet despite this, more people are fixing home loan interest rates at five years. "Who is advising them to do this?" asks Tripe.
Shona Bishop, general manager of marketing for the BNZ, says there has already been a lot of interest from people in TotalMoney, despite its advertising campaign and website yet to begin operating.
"The grouping and the offsetting have been the two big ones," she says. "For people, the concept of grouping with their family or grouping accounts with their partner has been pretty amazing. Then the opportunity to pay off their home loan faster has been very strong."
A lot of interest in "offsetting" is coming from first-home buyers, parents and from younger people thinking "differently about how their affairs can be put together". Some existing methods for parents to help their children get into first homes are a lot riskier than many realised, says Bishop.
"People who are trying to help their children out by signing up their own house, underwriting a 100 per cent loan, we think that's a very dangerous strategy.
"We think that people don't understand the risk that they're putting themselves at."
Offsetting parental savings against a child's floating-rate loan allows them to contribute without putting savings or a family home at risk, she says
There is also no longer the "guilt factor", since the parents can decide to spend their savings on, for instance, an overseas trip, without increasing the mortgage payments of their children.
"A $10,000 contribution to a deposit on a house in Auckland wouldn't go far," says Bishop.
But $10,000 used to offset a floating-rate loan would make a big difference to the length of time it took to pay off.
TOTAL RULES
The BNZ is launching its TotalMoney product tonight, with TV commercials and a website going live on Monday. It says it is unique, offering the ability to group together lots of different accounts. It is also the first in NZ to offer "offsetting" where savings in one account can be used to reduce the home loan of another person. Groups can be individuals, couples (married, civil union or de facto), parents and children or trusts and non-trading companies.
* Only two generations of a family can form a group
* All accounts in the group must be TotalMoney accounts.
* It is not available to business customers. IRD says business customers can use it for personal but not business reasons.
* Friends cannot form a group.
* Any member of the group can see the others' balances, but not transaction details.
* There is no "cross liability" - if one person goes bankrupt or defaults on a home loan, the others are not affected.
* Loans are not given based on the savings of other group members, individuals must meet the lending criteria.
Pooling
The balances of each group member are pooled, so each gets the top interest rate. Individual balances are combined.
* For instance, a cheque account that currently does not pay any interest could attract the top rate of 7 per cent.
Offsetting
* Offsetting applies only to floating-rate loans.
* If $100,000 of savings from a parent, for example, is used to offset the interest on a variable home loan of an adult son or daughter, then the monthly mortgage repayments would not change if the $100,000 was then later spent by the parents.
* What would change is the length of time it would take to pay off the variable rate mortgage. BNZ says if one third of a $150,000 loan was floating, and was offset by $11,500 in savings and regular savings of $400 a month, then the loan would be paid off nine years earlier, saving the home owner just over $48,000 in interest payments.
* Tax, either income tax or withholding tax, does not have to be paid by either party - neither the account holder with all the savings, nor the person with the mortgage.
PIGGY BANK
BNZ says it hopes to offer the public a piggy bank version of the animated pigs in its advertising campaigns in the next six to eight weeks. Hand-painted piggy banks were given to staff at Christmas, but quality-control issues meant they were not made available in larger numbers. A New Zealand supplier will make the new pigs.
