Kiwibank's loan guarantee 'a marketing ploy'

By KEVIN TAYLOR

A banking expert doubts that the big five banks will respond to Kiwibank's "marketing ploy" to offer a home loan price guarantee.

The state-owned bank has said it will guarantee better interest rates than the other major banks for the next six years and will refund the difference if home loan customers find they would have been better off elsewhere.

But Claire Matthews, acting director of Massey University's banking studies centre, said yesterday that the offer was a marketing ploy and she doubted the other banks would respond competitively.

The big banks have not yet responded to Kiwibank's moves to undercut their mortgage rates by about 1 percentage point.

Matthews also doubted whether Kiwibank customers would be bothered tracking mortgage rates for six years - the average life of a mortgage.

But Kiwibank external relations manager Bruce Thompson said the bank was showing that its rates were sustainable over the long term and answering claims that the rates were just opening specials.

He pointed out that banking studies lecturer David Tripe believed the other banks were likely to respond in three to four years, when Kiwibank had a bigger share of the market.

"It appears the commentators are having a dollar each way," Thompson said of the Massey colleagues.

"We believe we can consistently undercut the other banks.

"We are not just like the rest. We believe our position is sustainable, and we are guaranteeing it."

Matthews said the six-year time frame was a big problem. "I can see it being a hassle to work out whether you would have made a saving."

The bank would provide information on competitors' rates, but would not volunteer it, she said. "You still have to make the first step and go to Kiwibank."

Thompson said if a customer believed another bank had offered lower rates, Kiwibank would investigate. It would also recognise an independent assessment.

"If they would have been better off with one of the other main banks, we will pay the difference in cash."

Matthews said another problem was that Kiwibank was measuring itself only against the big five banks, not any other lenders. This excluded a subsidiary of one of the big five - ASB's Bank Direct.

"Kiwibank appears to be saying it can't be sure it can remain competitive against these providers," Matthews said.

She said Kiwibank had the lowest rates, but rates were not the only thing people wanted from banks.

Thompson said Kiwibank was competing with other banks in a similar position - those with a nationwide network offering full banking services.

Last month, Tripe estimated that Kiwibank's share of the home loan market was just 1000 customers.

Matthews said home loan customers had not flocked to Kiwibank, and she did not believe the guarantee would make much difference.