by Paul McBeth
Mortgage lenders that promote ways you can reduce your debt? Isn't that kind of a contradiction?
You'd think they'd want you to be in hock for as long as possible so they can keep collecting all that interest. But it's big business these days to push ways you can pay your loan back faster, consolidate debt and potentially reduce your borrowing through the likes of revolving credit accounts.
While the trading banks have only recently got in on the act, mortgage lenders like New Zealand Home Loans have made debt consolidation and reduction their marketing focus for quite some time. The Hamilton-based company has 12 outlets, all bar two in the North Island, and its loans are administered by Sovereign Financial Services.
The average loan size is currently $143,000 and Communications Manager Dave Jamieson says that since NZ Home Loans opened its doors four years ago, "we've saved 10,000 families from the banks".
Jamieson runs seminars up and down the country - some 150 a year - to talk about managing your home loan and becoming debt-free. He's also developing a new seminar that looks at what to do when you approach, or actually reach, the point when your debt is finally paid off.
"We're trying to provide people with the opportunity to set some goals: we've found that New Zealanders don't really do that very much."
Jamieson says that consolidating debt such as a home loan, credit card and any hire purchase and perhaps putting income through the home loan "is nothing particularly new".
"However, it does require quite a mental shift of gears for some people.
"There's been so much education in the market from the banks to say you've gotta fix. They've created a sense of impending doom, so that you're always getting asked your (mortgage interest) rate. But that's not the most important thing: what's most important is the rate at which you can pay it off."
Jamieson cites an AMP Banking survey released earlier this year, which found that New Zealanders don't really want to think about managing their mortgages. The biggest barriers to restructuring were cost, time, lack of sufficient income and aversion to change: ten per cent of those surveyed didn't want to change their arrangements regardless of whether it would save them money in the long term.
Jamieson says that cost is something the market is working on. Many lenders now offer a small flat rate charge for arranging a mortgage rather than the more traditional 0.5-1.0 per cent of the loan principal and there are often special deals on initial fees, legal charges and the like.
"As for saying you don't earn enough (to restructure your loan), the fact is that you don't earn enough not to."
He doesn't have an answer for people's aversion to change, though.
"In spite of the fact that the banks universally do not satisfy their customers, people tend not to switch. In marketing terms, that flies in the face of logic."
But Jamieson puts a positive spin on the fact that those very same banks are now getting into the debt reduction game that's a key part of NZ Home Loans' focus.
"At the end of the day, if there are more and more players in the marketplace referring to processes that are similar to what we offer, that will create a much greater awareness overall. I see that as a very positive thing."