Mortgage war: Kiwis winning over their bigger Australian-owned rivals

"Kiwis like supporting Kiwis," mortgage adviser says

Mortgage war: Kiwis winning over their bigger Australian-owned rivals

More and more borrowers were asking to have their loans placed with locally owned banks, according to mortgage advisers.

A recent KPMG report found that bank profits plateaued in the final quarter of last year, partly due to the anaemic growth in their home loan business. New Zealand-owned banks, however, saw their home loan businesses growing faster than their big Australian-owned competitors.

“Kiwis like supporting Kiwis,” mortgage adviser Glen McLeod from Edge Mortgages in Auckland told Stuff. “We get a lot of requests from clients saying they really want to go through a New Zealand bank.”

The latest Reserve Bank data revealed that in the final quarter of 2022, Kiwibank, SBS, TSB, Heartland, and Cooperative Bank all outpaced the big Australian banks for mortgage growth.

Kiwibank led mortgage growth among the big five retail banks, followed by BNZ, which has been offering special rates through mortgage brokers for new customers.

The end of 2022, banks saw anaemic lending growth, with total bank loans, including business and farming loans, lifting by a mere 0.64% in the last three months of the year, lower than the increase in each of the previous eight quarters, KPMG’s figures showed.

That period also saw Kiwibank’s mortgage lending climb by 1.65%, taking its mortgage book to more than $24bn for the first time, while BNZ’s grew by 1.47%, and ANZ, Westpac, and ASB by less than 1%.

Karen Tatterson, mortgage adviser from Loan Market, also noted that many home buyers prefer local brands, saying that was “quite important to many people.”

Another advantage of locally owned banks was their commitment to first-home buyers, Stuff reported.

“They (locally owned banks) have worked hard to support first-home buyers,” Tatterson said.

Kiwibank, SBS, and Cooperative Bank all offered low-deposit, Kainga Ora first home loans, wherein a portion of the risk to banks were covered by taxpayers.

The Kainga Ora loans aimed to help lower and middle-income couples buy homes with as little as a 5% deposit.

As a result of investors having pulled back, first-home buyers were taking out a greater share of new mortgages, McLeod said.

In February, 21% of new loans by value were to first-time buyers, up from 17% in February last year, and 15.5% in February 2021, RBNZ data showed.

Cooperative Bank’s home loan business grew by 2.57%, SBS and TSB by more than 3%, and Heartland by a massive 9.8%, but still, the big four banks rule the home loan market.

The end of the year saw ANZ, BNZ, ASB, and Westpac having a combined $296.1bn in home loans, compared to just $38bn at the five NZ-owned retail banks, RBNZ data showed.

With around half of all home loans now being arranged by mortgage advisers, it has become increasingly important how banks market to these home loan experts, McLeod said.

Kiwibank, too, has been active in wooing mortgage advisers, he said.

BNZ had been “pretty aggressive” in their marketing to advisers, especially with its special rate of 4.99% for one-year loans to new customers in February, which was not offered to its existing borrowers, Tatterson said.

Smaller banks may have another edge though.

According to independent economist Tony Alexander, the smaller banks may have been quicker to adapt to changes in responsible lending laws, which have been blamed for having slowed mortgage lending.

Tatterson said the smaller banks had tended to be faster when it came to approving or declining applications for loans.

In contrast, some big banks were taking up to two weeks to decide on applications – this despite far fewer sales taking place, resulting in speculations that banks have downsized their home loan teams.

Banks were all much of a muchness when extending special offers for new customers. BNZ and ANZ were offering up to 1% cashback on new home loans, while ASB was offering up to $3,000 in cashbacks for borrowers taking out loans of 250,000 or more.

Mortgage lending increasingly dominated banks, with business lending having shrunk in recent years.

At the end of December, home loans accounted for 64.89% of bank loans, up from 63.5% at the end of March 2021, KPMG data showed.

Lending to business, meanwhile, had held steady at just over 20% of total bank loans, but loans into the agricultural sector had slipped from 12.76% to 11.6%, Stuff reported.

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