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Kiwibank has cut its one, two, and three year fixed mortgage rates by about 0.10% each, basically matching the best rate in the market for these terms.

Its one year rate is now 6.15%, matching The National Bank, which previously had the lowest rate of any bank. Southern Cross Building Society has a one year rate of 6.10%.

Kiwibank’s two year rate is now 7.10%, beaten by TSB Bank on 7.09%.

Its three year rate is 7.70%, which makes it as low as ASB’s offer, and beaten only by HSBC’s 7.69%.

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By Emma Geraghty

New Zealand’s Privacy Commission is set to debate a move likely to be recommended within weeks in Australia towards a ‘comprehensive’ credit reporting regime that would see banks and card providers capture more data about consumers’ credit habits.

This move towards a more ‘positive’ reporting regime used in most other countries, including the United States, allows lenders to better target credit cards at those who have demonstrated they are a good risk. New Zealand’s current ‘negative’ reporting regime records only credit failures (including defaults or rejected applications) rather than successes (such as paying bills on time and receiving salaries). New Zealand, France and Australia are the only OECD countries who still use ‘negative’ reporting.

Some bankers and credit card providers argue a more comprehensive system makes it easier to provide credit to those who can pay and makes it easier for banks to more accurately price and market credit cards.

However, the move could prove controversial. Some have accused US lenders of using these more detailed credit histories to push card deals repeatedly and directly at those who can still afford it, increasing the total amounts borrowed using such cards in a predatory way.

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By Emma Geraghty

Banks are increasingly looking for ways  to make it easier for baby-boomer parents to help their children buy expensive houses in the wake of the property boom.

The essential problem is that parents and grandparents may have savings locked up in term deposits or in house values, but don’t want to simply hand the cash over to their kids, while their kids lack either the deposit or the income to make the big leap into home ownership.

BNZ launched its TotalMoney home loan three years ago. It allows savings in up to 10 related accounts to be ‘pooled’ or ‘offset’ against a mortgage, which allows the borrower to borrow more and generates an effective return for the savings that is higher than a regular term deposit rate. However, it means the related savers (often parents, grandparents, aunties, uncles etc) are sacrificing their interest payments so that the kids or grandkids can borrow more.

BNZ’s Chief Operating Officer for Retail, Glenn Patrick, said parents can make a difference to the amount of money their children can borrow and the level of interest they will pay.

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By Emma Geraghty

Most banks are now back promoting deals to credit card holders that allow them to transfer their balance onto a new card at a low interest rate for a specified period of time, aiming to win market share and ramp up lending as the economy recovers.

Many banks withdrew their special ‘balance transfer’ promotions during the depths of the financial crisis in late 2008 and early 2009 in an effort to avoid being swamped by heavily indebted customers looking for an easy way out.

A balance transfer can act as temporary relief to card holders with a large amount of debt looking for a quick solution to service the debt. However, customers still often end up paying a high interest rate on any purchases above their transferred balance, which remains at a low interest rate for a specified time only — often 6 months.

All of the big banks except ASB now offer the special interest-only deals, with offers ranging from 2.99% to 8.75% for around six months, well below the regular interest rates of around 19.99%. The Warehouse has the lowest rate at 2.99% and ANZ and National have the highest at 8.75%. See bank credit card rate details here.

ASB General Manager of cards transactions and payments Shaun Drylie said ASB did not offer a special balance transfer rate because it aimed to provide a competitive interest rate on total balances. Non ASB customers can still transfer balances to ASB, but must pay the full rate on all the balance from the start.

“Our low-interest Mastercard is proving extremely popular, with a rate which is more than 1/3 lower than a standard credit card,” Drylie said. ASB offers a ‘low interest/no rewards’ Mastercard from 12.50%.

When lower equals higher

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Kiwibank has announced plans to raise up to NZ$150 million of tier 1 capital through a perpetual callable non-cumulative preference share issue opening in early April. It has not set an interest rate yet.

The preference share issue will be similar to tier 1 issues by other major banks in early 2008 when they wanted to raise tier 1 capital to help support lending growth. This avoids Kiwibank’s parent NZ Post asking for a pure equity capital injection from the government at a time when the government is very reluctant to spend more.

Kiwibank was careful to point out the preference shares did not include voting rights or the ability to convert into full ownership at a later date, which would have been a privatisation through the back-door.

Here is the full statement below

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Kiwibank has reduced its four and five year fixed mortgage rates by 29 bps and 19 bps respectively, effective immediately.

This move is the first by another bank to respond to rate reductions by ASB late last week, and these Kiwibank reductions match the ASB rates for these terms. Both banks have opened up about a 0.25% advantage over other banks for longer term rates.

ASB’s earlier moves down for shorter term fixed mortgage rates matched Kiwibank and the rest of the market.

With a growing realisation in moneymarkets that official rates will be lower-for-longer, both here and in Europe / USA, wholesale swaps have been trending lower as are the 90 day bank bills. This is opening up some margin that can be used to compete for mortgage market share.

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