NEWS

Concerns over NZFSG-Kepa deal

Advisers expressed concerns that a merged NZFSG-Kepa group would exert too much control over the New Zealand adviser market. NZFSG announced its takeover of Kepa in early October, a transaction which will create a national dealer business with more than 1,600 members, settling $17 billion of mortgages and issuing $30 million of life insurance premiums. As the dust settles from the announcement, advisers have privately voiced fears the deal would reduce competition in the adviser space.

Advisers are concerned the combined NZFSG-Kepa organisation will have too big a share of the market, and worry there will be reduced choice for mortgage brokers as sector consolidation continues. Brokers fear the dwindling choice of dealer groups may lead to increased costs for adviser businesses. "NZFSG already had a massive share of the market, so I'd be amazed if this wasn't being looked at by the regulators," one adviser said.

The takeover deal is subject to Overseas Investment Office and New Zealand Commerce Commission approval. The two companies expect the deal to be settled by October 30. TMM Online asked the Commerce Commission whether the deal had already been given the green light. "We have not received an application for clearance, but we are aware of the transaction," the Commission said in mid-October.

Heartland launches market-leading 1.99% mortgage

Heartland has relaunched its direct-toconsumer mortgage with a record-low one year rate of 1.99%.

The digital home loan offers 1.99% – the lowest ever in NZ – for one year fixed home loans, 2.35% for two-year loans, and three years at 2.45%.

Heartland will also offer a floating rate of 2.95%. Heartland's new product is only available direct to consumer, through a "self-serve" online application. The rates are significantly cheaper than those offered by Heartland's rivals. The cheapest one-year bank rate on the market is HSBC Premier's 2.45%, while KiwiSaver provider Simplicity offers a 2.25% mortgage to its customers. Heartland has eyed a relaunch of its digital home loan for several months after the successful trial of a 2.89% digital mortgage in March. The last iteration of the digital loan had a $50 million cap.

Heartland Bank chief executive Chris Flood told TMM he expected the bank rate to remain the cheapest in the market. "Coming out with a top rate, we need to think that our position can be maintained. With these rates, we think they can be. Everybody has the ability to drop rates and compete, but we feel confident these rates will remain attractive." Flood said the bank is hopeful of making the product a permanent one. "Absolutely, and that's the reason we're doing it. We want to be market-leading in everything we do."

Are banks treating high LVR customers any differently?

While loan-to-value ratio restrictions were scrapped months ago, advisers say lenders have been slow to change their approach to high LVR borrowers. LVR rules were scrapped in April following the Covid-crisis to boost credit availability during the recession.

Yet the Reserve Bank's move appears to have had a marginal impact on the lending market, according to advisers. Kris Pedersen, of Kris Pedersen Mortgages in Auckland, said: "I wouldn't say [there's been] a huge difference in appetite." He said there was "a bit more in the 80%90% space". "They've tightened in the above 90% [LVR] to only doing the First Home Loan product, whereas pre-lockdown, there was some funding outside of this up to 95%."

Wellington-based Craig Pope said: "I certainly haven't seen any more leniency towards the low deposit borrowers. It's a real moving target, but the usual barriers are still there with banks still preferring to pre-approve their own customers unless there is a live S&P for new-to-bank customers. "Our low deposit borrowers are really struggling with the need to have valuations, and fast-rising house prices, making putting in conditional offers difficult."

Some advisers have noted positive changes in recent months, however. Hamish Patel of Mortgages Online believes loan applications with 10% deposits "are much easier, with pricing much better than three months ago". "There's a greater degree of flexibility on low LVR, especially around commission and loan term," noted iLender's Jeff Royle.

Frustration over home loan processing

Mortgage advisers say their turnaround times continue to be much slower than direct home loan applications, leading to frustration across the industry. Several advisers told TMM Online that direct customers were getting preferential treatment. Krish Krishna of Mortgage Suite said there were "major hold-ups" in getting home loans approved.

He said banks were processing direct loans more quickly: "I am also aware of one case where someone got approved within three days by going direct to the branch.

"The problem, to some extent, is the banks' own doing. The broker hubs have taken control over all business applications as well in the case of ANZ, ASB and Westpac," Krishna added. Andy Phillipson of The Mortgage Shop also said there was a significant discrepancy in processing times. "I know of instances where a client got a home loan approved, and the contract confirmed before we even got a response from the broker unit. I presented a loan application to one bank, and without a response within a week, the clients went direct to their own bank. They got a full approval within days and the loan was settled within a couple of weeks."

Phillipson is concerned that banks are staying away from non-standard deals. "Either there is a concerted effort by the banks to reduce the broker-led business, or the lending decisions are governed so much now by a "paintby-numbers" system that logical deals from advisers that do not fit the pigeonholes are immediately tossed out." ✚

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