Floating rate rise riles customers
It’s not the demise of the National Bank brand which is getting borrowers talking to their brokers about switching banks, it’s a decision by another bank which is getting the phones going.
Friday, October 26th 2012, 6:00AM 6 Comments
Brokers spoken to by mortgagerates.co.nz say that Westpac’s decision to hike its floating rate by 15 basis points has got people talking about moving banks.
One well-respected broker, who wished to be unnamed, described Westpac’s decision as “insanely stupid.”
He says they should immediately reverse the increase.
Another described it as “nuts”.
Brokers spoken to couldn’t understand why Westpac has increased its floating rate when home loan rates have been flat or falling.
The logic behind Westpac’s move is unclear. One possible reason is that it is trying to shift customers to its fixed term rates.
However, it is generally considered that banks have better margins on their floating rate products, rather than fixed.
Another possible reason is to increase profits.
However, this seems short-sighted, the broker says, as it is disenfranching its most valuable customers.
He said it takes a lot for his clients to ring him and complain, but he has had numerous calls since Westpac made the decision.
We asked to speak to someone at Westpac about its pricing strategy and were furnished with the following written response: “Westpac's mortgage pricing approach takes into account the dynamics in what is a highly competitive market.”
“We aim to price competitively. In particular, our everyday floating rate is well matched to market. On fixed rates, we are priced competitively at short to mid terms.”
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