Kiwibank is cutting its floating mortgage rate in a major move that will shake up the home loan market.
It has cut 100 basis points from its 4.40% rate to the new level of 3.40%.
At that level, it is a rate that is much more competitive with fixed rates.
If the move motivates the big four Aussie-owned banks to match it, it will lower lending to micro and small and medium sized business clients significantly. These mortgage clients have often put up their house as security under floating rate borrowing, a credit line that often uses revolving credit contracts.
And Kiwibank's move reduces all other business lending benchmarks by the full 1.00% as well. That includes the bank's business variable loans, business revolving credit, and business overdraft.
Businesses under severe cost pressure will look at the new Kiwibank offers seriously now. It is likely that the other major will need to respond similarly, whether that be in their rate card, or in informal client-specific deals. The problem SMEs might have however, is that their financials are recently weakened. That makes the equity in their residence or other property a key factor in how the banks will respond to customers seeking lower floating rates.
Kiwibank says the rate cuts will result in repayment savings of $20 million for more than 35,000 home loan and business banking customers. They say a customer with a $400,000 variable loan would be $100 a fortnight better off.
Thursday’s changes to the variable rate come into effect for existing Kiwibank customers on 29 June and for new customers on 15 June.
Kiwibank customers on variable rates will automatically benefit from the changes. Customers coming off fixed loans and new customers can take advantage of the lower, flexible rates through Kiwibank’s website.
Kiwibank CEO hails 'big reset'
In a LinkedIn post Kiwibank CEO Steve Jurkovich describes the rate cuts as the "big reset" and "one of the boldest moves we’ve ever taken."
"Its a BIG RESET of the lending market in New Zealand, which will make a real difference for our customers," Jurkovich writes.
"Today we’ve reduced the pricing gap between fixed and variable lending rates by 100bps (1%) from our variable lending rates across the board. This is about Kiwibank resetting the lending market to give our customers more flexibility and choice when it comes to structuring their loans. It means money in pockets today or paying off loans faster; it means easing the pressure on homeowners and businesses at a time when so many are facing big challenges," says Jurkovich.
"Now more than ever, banks need to continue to step up and do their bit. As the biggest New Zealand owned bank, Kiwibank is proud to play its part."
Here is an update of how each bank compares.
| Floating | Lowest | ||
| as at June 11, 2020 | Rate | fixed rate | |
| % | % | ||
| ANZ | 4.44 | 2.65 | one year |
| ASB | 4.45 | 2.69 | two years |
| BNZ | 4.55 | 2.69 | two years |
| Kiwibank | 3.40
 |
2.65 | one year |
| Westpac | 4.59 | 2.69 | two years |
| Bank of China | 4.35 | 2.55 | one year |
| China Construction Bank | 5.00 | 2.65
|
one year |
| Cooperative Bank | 4.40 | 2.79 | 12/18/24 mths |
| Heartland Bank | 3.95 | 2.89 | one year |
| HSBC | 4.49 | 2.60 | one year |
| ICBC | 3.99
|
2.58
|
one year |
| SBS Bank | 4.54 | 2.79 | one year |
| TSB | 4.54 | 2.65* | one year |
* Available under their "Price Match Promise".
53 Comments
I reckon they love people floating at the current rates. it’s effectively a gentleman’s agreement not to lower floating rates and I bet they make a fair amount of profit from them. Kiwibank is not being very gentlemanly (maybe they don’t have many floating customers). If the others have to match there will be big profit decreases.
And Kiwibank's move reduces all other business lending benchmarks by the full 1.00% as well. That includes the bank's business variable loans, business revolving credit, and business overdraft.
Surely higher capital demands and lower returns from new business debt extensions will impact Kiwibank's profits and immunity to withstand under performing loan repayments.
Are taxpaying depositors being set up for a possible Kiwibank bail out/bail in scenario down the track?
The higher capital demands have been parked for now, due to the environment we're in. And unlike the Big 4, Kiwibank is on the "standard" capital models which I would argue are high enough for capital adequacy requirements. With that in mind it would take a very negative economic situation to put the bank into a bail out situation. Are we headed for that? We are going into a significant recession yes, but not quite in the territory you're alluding to.
Hmmmm. - are they trying to cripple the Aussie banks or will RBNZ get there first?
How many banks have disappeared since ECB began in 1999 in the eurozone? Do you think this is linked to ECB policies, on interest rates (flattening yield curve, suppressing profit margins for traditional lenders) & increases in the volume & complexity of bank regulations?Link
A bit off-topic, but has anyone here tried to open a joint account (or joint TD) with Kiwibank?
After 2 weeks, 6 phone calls and one trip to the nearest branch, I gave up. There was a messup at every single step of the process. Phone calls not happening at the agreed time (usually got the call a day later), conflicting information about how we can prove our identities, clearly untrained staff at the branch... It was a huge waste of time.
Went to ASB with just our passports, had a joint TD set up in 30 minutes.
Kiwibank's customer service is not what it used to be - we tried to open a business banking account with them a few months ago and gave up after a few weeks of trying - as Court Jester says "conflicting information about how we can prove our identities, clearly untrained staff at the branch... it was a huge waste of time."
I did this about 3 years ago. It was a nightmare. They had supposedly set it all up with me over the phone and my wife and i just needed to go in to show ID and sign some forms. It ended up taking 2 more trips to the branch and several phone calls. I have not recommended any of my friends or family move to Kiwibank for that reason.
We had no trouble, though it was a number of years ago. Got given a cheque as a wedding present made out to Mr ... and Mrs ... - the teller wouldn't let us deposit it into either of our individual accounts. We asked if we could set one up, waited about 5 minutes before being taken to an office got it done on the spot without an appointment.
I preferred it to the experience at ANZ where they didn't even have offices, just open desks where anyone queuing up could have heard the 20 questions they asked us to try and sell all their other services that we said at the start that we weren't interested in.
I find with banks it's generally best to do things online, as there seems to be pretty reasonable investment in that....at least for the banks that I've dealt with. Kiwibank, included - opened a couple of TDs with them online and that was dealt with quite efficiently.
I had a similar experience with an additional card on credit card. It was sent to a different address as it was what I wanted at the time. When it came time to get a replacement because it had expired, it went to the same address. There was absolutely nowhere where the old address was visible. I wasn't even allowed to update it. (remember this is an additional card on an account, not a joint card. I was personally liable for all of it and the additional card holder was not). It took about 5 phone calls to get the address changed. They also canceled her currently working card early and the card that had been sent to the wrong address. It only took 2 weeks to sort. I had to phone them when we were both at home during normal business hours. It was a complete joke. Not banking with them anymore.
I got a surprise unsolicited email from my ANZ banking manager 2 days ago, offering to reduce two flexi (revolving credit) loans, here's a copy of their email:
We have made some adjustments for you today. Flexible Facility $------ now added 0.60% discount margin – new total actual rate 3.65%p.a.
Your HML ****-**********-**** will been reduced (0.70% discount) to align with your existing floating term home loan at 3.44%p.a.
And here's me thinking my current Floater of 4.05% was something special! I guess 3.55% or less on the way then - not that it will make any difference on Offset, of course :)
But I guess every cents counts to some, wherever they are:
"A discounting war is in full swing in the rental market as landlords try to fill empty properties or keep existing tenants"
"Property investors already struggling with falling rents and rising vacancies face a further cash flow crunch as the number of empty rental homes languishing on the market starts to surge"
https://www.afr.com/property/residential/discounting-war-as-landlords-s…
https://www.afr.com/property/residential/cash-flow-crunch-for-investors…
I've got a 1% and 0.75% discount off floating rates with BNZ for two offset mortgages. They can rescind the discounts at any time but so far they've not touched either of them.
I'm hoping they drop their floating rate by 1% following Kiwibank and do nothing to touch my discounts - then I'll actually be paying only 2.45% on one of them! (although I have it 100% offset anyway so...).
Of course, this won't happen to us!
"In Sydney, a total of 17,289 houses hit the market, up 25.2 per cent from March. An additional 8708 units were put up for sale, lifting the apartment stock on the market by 18.4 per cent"
and then, there's Christchurch.....
"2004 and got the housing development underway but later Pegasus Town defaulted on a $142 million payment and went into receivership. The Pegasus development was then sold to Todd Property for $66m in late 2012. The consortium of New Zealand and international investors that bought the huge Todd Property residential development portfolio has put them on the market."
https://www.stuff.co.nz/business/121779175/commercial-properties-at-peg…
"In Sydney, a total of 17,289 houses hit the market, up 25.2 per cent from March. An additional 8708 units were put up for sale, lifting the apartment stock on the market by 18.4 per cent"
That's a big jump. I was interested in this and notice this comes from AFR. Melbourne is also up 20%+.
Kiwibank are our mechant supplier for our shop Eftpos. During the lockdown we did "0" trades through the eftpos machine. I see Kiwibank still charged us a minimum charge for the months the machine wasn't used!
In the past we have had nothing but hassles with Kiwibank and do not recommend them. We haven't changed banks yet due to the drama changing everything over. At times we have been very close. Years ago Kiwibank used to be good to deal with.
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