With its latest 'special' mortgage offer not standing out from the pack, Kiwibank won't rule out joining the give-away party

By Gareth Vaughan

As rivals' offer everything from TVs, iPads and cash for groceries with their home loans, Kiwibank says it's focusing on interest rates and service rather than "peripheral offers", but isn't ruling out joining the give-away party in the future.

Kiwibank this week launched a 4.99% two-year fixed mortgage rate "special offer."

The state owned bank has been running "special, limited time" mortgage offers, typically for a few weeks, on and off since early 2011. At times the offers have heavily undercut advertised, or carded, rates from rivals'.

One such example was a previous 4.99% one-year offer launched in April 2012. Unlike the current offer it was conditional on borrowers having at least 30% equity in their homes. That offer sliced 66 basis points off Kiwibank's advertised one-year rate, was 30 basis points below the next best advertised one-year rate, from HSBC for its premier customers, and 60 basis points below the next best advertised one-year rate, which was from Westpac.

However Kiwibank's latest special rate, which cut its previous one-year rate by 26 basis points, doesn't stand out from the pack. SBS Bank is advertising 4.99% for six-month, one-year and two-year fixed mortgages. BNZ 4.95% fixed for one-year, and TSB Bank 4.95% fixed for 15 months. See all advertised bank mortgage rates here.

"I think the reality is that the other banks are now responding to the Kiwibank initiatives much more aggressively which tightens the gap between the various bank offers," Kiwibank spokesman Bruce Thompson told interest.co.nz. "Our view is to focus on value, both rate and service rather than peripheral offers like appliances and holidays. We never close off options, but we are presently focussing on value and it is working."

Kiwibank's latest General Disclosure Statement shows it grew residential mortgages by NZ$510 million in the December quarter, behind only ASB's NZ$932 million.

Thompson added that Kiwibank had offered TV’s to customers four years ago and found it had negligible impact, if any, on a customer’s intentions.

"So we have strayed away from such offers and focused on the overall value of rates, low fees and making it easy. We have still on occasion offered such incentives when appropriate; for example as part of last years ‘The BlockNZ’ we offered new customers $2,000 worth of Dulux paint and entry to a grand draw for a master painter for the customers entire house, again as we felt this more relevant to the market and better overall value a customer would perceive as attractive to them," said Thompson.

Other banks are currently throwing in extras to entice borrowers. BNZ's offering NZ$1,000 for fuel or groceries and up to NZ$1,000 for legal fees with new lending of NZ$100,000 or more, although this is contingent on borrowers having 20% equity in their property. TSB's offering up to NZ$1,000 towards legal fees and is chucking in an iPad or iPhone 5. And ASB, off the back of offering Samsung Galaxy tablets and up to NZ$1,000 cash, is now offering Sony Bravia 42-inch LED TVs and up to NZ$1,000 cash on new lending over NZ$100,000.

And ANZ is running a competition whereby 10 customers win back their annual home loan repayments every month. ANZ says, monthly, another 20 get NZ$2,000 cash. And those taking out new home lending of at least NZ$100,000 get NZ$1,000 cash.

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