By KEVIN TAYLOR
Kiwibank has followed the other big banks in raising home-loan rates, but the Government-backed bank is still undercutting the competition in what it claims is a profitable strategy.
On Friday, WestpacTrust, ANZ, BNZ and ASB lifted their home loan floating rates from 6.7 per cent to 7.2 per
cent after the Reserve Bank's move last Wednesday to increase the official cash rate. The National Bank followed yesterday.
The big banks' increases were double the Reserve Bank's OCR shift of 25 basis points to 5 per cent.
When Kiwibank's products were introduced in February, its floating rate for mortgages was 6.1 per cent.
Yesterday Kiwibank said its floating rate would rise to 6.7 per cent - its rivals' old rate.
External relations manager Bruce Thompson said the margins were still sufficient to be profitable.
David Tripe, the director of Massey University's centre for banking studies, said that the interest rate rises by the big banks seemed fairly generous and there could be more to come.
The margin between the 90-day bill rate - about 5.5 per cent - and the OCR rate was unrealistically high and appeared to be anticipating further unusually large and prompt rises in the OCR.
"That might well be an unrealistic assumption, but banks have certainly pushed the limit of what's reasonable."
But Tripe said there would have been grounds before the Reserve Bank moved last week for pushing up floating mortgage rates a little, because 90-day bill rates had risen in anticipation of the OCR rising.
Kiwibank would not be as dependent on the wholesale markets for its money as other banks were.
"So to some extent, with the size of their loan portfolio it probably doesn't matter what they charge," he said.
Thompson said there had been a lot of interest in Kiwibank's mortgages, which could be obtained even if a local branch was not yet open.
Kiwibank opened seven branches in a pilot scheme in Palmerston North and Hawkes Bay in February.
Its expansion started in earnest on Saturday with a branch opening in Albany, and yesterday another eight branches opened nationwide.
By the end of this week, 35 branches will be open in postshops around the country.
nzherald.co.nz/kiwibank
