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Bouquets and brickbats from the Banking Ombudsman

Banks that helped customers cope with fluctuating break costs on fixed rate loans have won praise from Banking Ombudsman Liz Brown.

Monday, September 20th 1999, 12:00AM

by Paul McBeth

Banks that helped customers cope with fluctuating break costs on fixed rate loans have won praise from Banking Ombudsman Liz Brown.

Brown says some banks responded quickly to the problems their customers faced when interest rates were moving rapidly and it was difficult to get a firm figure to budget on for early repayment costs. The banks either offered to convert the loan to a floating rate loan at the date of the enquiry, so fixing the cost at that date, or agreed to hold the cost for a period immediately before settlement.

Gripes about fixed rate loans and about mortgage lending in general still dominated the list of new complaints received by the Banking Ombudsman's office this year. In her latest annual report, Brown says there's nothing wrong with banks charging penalties on fixed rate loans to recover the cost of early repayment.

However, she's concerned about cases where bank customers claimed they'd been given faulty information about their potential liability for these costs.

Customers either said they were :

  • Told on taking out the loan that, in their circumstances no penalty would be charged ( but later found they had to pay a substantial sum on early repayment); or
  • Unaware of the relevant provisions of their loan agreements.
  • Others were caught unawares when the repayment cost increased substantially between the time they made initial enquiries and the actual settlement date.

Sample cases given out with the report included two that weren't upheld, titled "The importance of understanding the documents you sign". Brown said she received a number of complaints from customers with fixed rate loans who accepted that they had to pay costs of any early repayment but didn't see the arrangements they asked their banks to make as amounting to early repayments.

In one case, a customer said he didn't want to repay his loan but to "restructure" it (to take advantage of lower interest rates). He argued that, at the end of this restructuring, he would owe the bank precisely the same amount of principal and couldn't be said to have repaid the loan.

Another customer asked his bank to change the rate on his loan from fixed to floating, believing that a clause in his mortgage document gave him the right to do this without a penalty.

However, Brown said that both complainants seemed to have failed to understand that, by entering into a loan agreement that specified a fixed interest rate for a term, they were binding themselves to an agreement to continue paying interest at that rate until the end of the term.

Paul is a staff writer for Good Returns based in Wellington.

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.89 6.75 6.39
Median 8.64 7.14 6.82 6.65

Last updated: 15 July 2024 11:47am

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