Even as four of the five major home lenders raised their floating mortgage rates in the wake of the latest rise in the Official Cash Rate (OCR), Kiwibank is keeping its floating rate unchanged and has cut all its fixed rates by 10 basis points.
WestpacTrust, ANZ Bank and ASB Bank raised their floating rates from 7.75% to 8% over the past week, while Bank of New Zealand raised its rate from 7.75% to 7.99%. National Bank is the only one which hasn't moved. Kiwibank's floating rate is currently 7.1% while its fixed rates are between 20 and 30 basis points below those of the major banks. (To see a full list of ratesCLICK HERE)
The increases have come even though pricing in the wholesale market suggests they aren't warranted.
The Reserve Bank raised the OCR from 5.5% to 5.75% last week, but the 90-day bank bill rate, the key rate from which floating rate mortgages are funded and priced, have remained around the 6% level since mid-June.
The usual margin on floating rates is accepted as between 150 and 200 basis points above the 90-day bill rate, meaning the four major banks' margins are now at the extreme upper limit.
"Not for many, many years have I seen a margin that fat on a lending book in New Zealand," says Kiwibank chief executive Sam Knowles.
"I think it's just an opportunity to make some excess profits off their existing customer base," Knowles says, adding that it provides an even greater opportunity for his bank to woo the banks' customers.
Knowles says the major banks' philosophy in New Zealand has always been to entice customers in with sweetheart deals and then to gouge as much profit out of them as possible thereafter, relying on the fact that once hooked, it's hard for customers to change banks.
"The market doesn't realise that these days transferring a mortgage is an easy transaction," he says. All the customer has to do is sign the agreement and Kiwibank will manage the process for them.
