Kiwibank unveils mortgages cheaper than other banks'

10.30 am

Kiwibank said today it will offer mortgage rates at 6.1 per cent for both variable and one-year fixed term loans.

Main trading banks' floating rates are currently running at 6.7 per cent.

Kiwibank will also waive the establishment fee in a bid to lure customers to the new state-owned bank, chief executive Sam Knowles told National Radio.

At present, of the main banks, HSBC Bank is offering the lowest floating mortgage rate at 6.3 per cent. Some banks are offering 1 year fixed mortgage rates at 6.15 per cent.

Mr Knowles said there would be no establishment fee because there was sufficient profit margin in the on-going interest rates it was charging. Other banks did deals on establishment fees, he said.

"We certainly see the establishment fee as the banks double dipping."

Kiwibank said families would be able to reduce transaction fees by an average of 50 per cent by joining Kiwibank.

Kiwibank plans to open three branches in Palmerston North on February 12 and four in Hawke's Bay on February 13. All products will be available in those regions.

Mr Knowles said the fact that other banks had cut a number of their fees before the full launch of Kiwibank showed there was plenty of room for cuts to be made.

He said interest rates offered by Kiwibank on such things as feeless children's accounts would be higher than other banks.

The Hawke's Bay and Palmerston North pilot programme will run for six weeks before the bank opens nationwide in April and May.

The pilot will involve three PostShops in Palmerston North and shops in Napier, Hastings, Taradale and Waipukurau.

"This is not a test. This is the real thing with full banking services offered to these accounts," chairman Jim Bolger said in a statement.

Children's savings accounts would be offered interest rates of 4.5 per cent irrespective of how much was in the account.

Kiwibank will offer a "Bill Blaster" account where customers pay a set amount into an account each month and their bills will be paid automatically on time and a cash manager factility which will provide for muliple accounts with interest paid on the combined total.

Mr Knowles said in a statement Kiwibank had promised a simple fee structure and had delivered.

"We have received massive feedback from propective customers on our data base and have studied this carefully. There were consistent themes -- encourage saving for children, introduce lower transaction fees and make banking easier."

Kiwibank will have ATM/Eftpos cards, cheque accounts and phone banking.

Mr Knowles said international credit rating agency had rated Kiwibank at AA-minus, the same rating as other major banks in New Zealand.

The bank's launch was on time and on budget, he said.

By the middle of the year it expected to have close to 300 branches operating, the largest number of any bank.

He said talks were still going on about how much franchisees would be paid. Some had said the amount Kiwibank was offering was so small they would effectively be subsidising Kiwibank.

Mr Knowles said franchisees would get a big influx of new customers by taking on Kiwibank.

Given a difference of 0.6 percentage points between Kiwibank's variable mortgage rate and those offered by other major banks, people could expect to save around $46 a month on a $100,000 mortgage.

Other banks said it was too early to respond to Kiwibank's announced rates.

- NZPA

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