Banks with strong or rising home loan market share have a common trait - they prioritise broker channels. But because that is costly, they can no longer offer lower interest rates to borrowers

One of the defining aspects of the 2025 spring home selling season is the overhang of houses for sale. Sales are happening, but at softer prices as sellers shift to meet the market. It's not a situation sellers are used to.

But there is another unique aspect to this market, on the home loan side.

Apparent interest rate competition seems to have vanished, at least in terms of the carded rates.

The most popular term is still the one year fixed rate, and among the five banks that control over 90% of this market, they all have the same carded rates, 4.75%.

This is unusual. We looked back over the prior four years and found rate variation was not only common, sometimes it ranged as much as +/- 20 basis points around the average rates from these five banks.

The most striking feature of this review is how Kiwibank has shifted. No longer are they challenging the embedded big four Aussie banks on rates.

Looking at this "as at September 17" over each of the last five year is maybe somewhat arbitrary, but it does highlight how price competition has evaporated in 2025.

If we looked at the traditional two year fixed rate, we would find something similar, all these banks at 4.75% - except Kiwibank at 4.79%. In this space, Kiwibank is the higher.

For six months fixed, there is slightly more variation, between 4.99% and 5.09%.

We would be interested in reader feedback as to why this is happening. We do have a suspicion as to why Kiwibank has forsaken its price-challenging role; it has gone hard-out chasing new business via mortgage brokers. The last time we checked, they sourced 57% of their business from brokers, plus another unknown chunk from their NZ Home Loans channel. (At one stage, when their parent acquired NZHL, that was stated to be 30% of their mortgage origination, but there is no way to know whether that is still the case. We asked. They declined to say.)

The other big bank with outsized mortgage flows from brokers is ASB. They too won't say, but anecdotal enquiry suggests it could be as high as 80%. Again, we asked them, but they won't say, and ASB is the only big Aussie bank that does not reveal broker channel flows or portfolio balances. ANZ, BNZ and Westpac do, and their disclosures are in the 38% to 54% range, and very much lower than the other two.

We mention broker channel flows because it may indicate why ASB's carded rates are almost always above the average for this group, and why Kiwibank can now no longer 'afford' to be a price leader. These are speculations on our part, but paying the broker commissions comes at a significant cost to banks.

Chasing broker-channel origination does allow a bank to build market share. ASB is undoubtedly strong because of this. And Kiwibank has been winning market share over the past two years, increasing as it leaned in to its relationships with brokers.

That banks can win more business via brokers than chasing it directly is an indication that the choice about "what is best for the borrower" could be being compromised by incentives offered to the channel that don't flow to customer/borrowers. Hopefully our regulators are keeping an eye on that.

For any bank, a loss of market share can be painful, and prioritising the substantial volumes that can come from being a preferred bank in a broker lending panel can be a faster way to prevent system loss.

But the costs are high for banks. In fact, Australian analysts Macquarie have pointed out that the best profit improvement strategy for any mortgage bank is to downgrade their relationship with brokers. They have suggested following the demographic trend by making direct app channels as enticing as they can. The existing broker flows will then run off as that borrower group ages.

Building direct (proprietary) channels are expensive too, but they can be much more profitable for banks. In Australia, Commonwealth Bank of Australia's proprietary home loan channel is unique and a powerful driver of their success. But it is hard. Current Council of Financial Regulators (CoFR) regulation prohibits banks from paying sales incentives. When that was brought in (and for good reasons), many bank mortgage managers just shifted to broking firms who don't have any such restrictions. The incentives and behaviour may have changed at banks, but not necessarily among those who are brokers. There is some effort to professionalise the sector (FANZ) but only about 2000 of the 7000+ brokers operating in New Zealand have signed up to professional standards other than the minimums the Financial Markets Authority requires for registration - and none of those deal with how brokers are paid, or by whom.

So that is why we suspect Kiwibank and ASB are winning market share even though they offer no price advantage.