Kiwibank begins mortgage assault

Kiwibank is guaranteeing its home loan deals will better any other major bank in New Zealand over the next six years in a bid to lure customers from the big five.

The bank will refund the difference if a home loan customer is better off elsewhere during the period.

Banking expert David Tripe said the fledgling bank's latest "gimmick", if successful, could bring down mortgage rates in the next five years.

Kiwibank chief executive Sam Knowles said rates offered by other banks were far too high and Kiwibank was offering a better deal.

He would not reveal how many home loan customers Kiwibank has, but said the major five had "a lot of home loans" coming up for renewal.

"A large proportion of the market is written in the spring months and a lot of those people secure their loans for one or two years," he said.

The guarantee is available on all home loans secured against property and will apply to existing Kiwibank home loan customers.

At the end of six years Kiwibank said customers could compare the rates used over the period, whether fixed or variable, and if they would have got a better deal elsewhere, Kiwibank would pay the difference in cash.

Kiwibank would carry out the checks for customers and would accept independent comparisons.

Kiwibank believes it the first home loan guarantee offered in New Zealand.

Mr Knowles said the guarantee applied only to rates offered "openly to the public" by New Zealand's five major trading banks and excluded one-off offers and special deals.

He was not concerned that the big five would undercut Kiwibank and leave them with a big bill to pay.

Mr Tripe said the upside to the initiative was that it could force the major banks to lower mortgage rates.



But that was unlikely in the short term because Kiwibank's portfolio was so small.

Kiwibank customers should read the "fine print" because there were likely to be terms and conditions protecting the bank from big payouts.

"If there are no terms and conditions it's likely to provoke the other banks to go after Kiwibank."

Kiwibank offers lower interest rates than other major banks with its variable rate at 6.95 per cent compared to ANZ, ASB, BNZ, and WestpacTrust at 7.85 per cent, and National at 7.80 per cent.

- NZPA

Further reading:
nzherald.co.nz/kiwibank