Wizard disappointed with guarantee tactic
Wizard Home Loans has condemned Kiwibank’s so-called guarantee as a dreadful means of attempting to lure business
Wizard New Zealand head John Grant says "the offer by Government backed Kiwibank provides a so-called guarantee of having the lowest rates and will refund the difference if the borrower can show that an alternative would have been cheaper. However it comes with so many conditions that it is unlikely to see many claims paid.
"Firstly, there are more than 60 lenders operating in the New Zealand market but the guarantee only applies to the five trading banks. These banks are traditionally the highest cost lenders. The guarantee excludes specialist lenders like Wizard that consistently offer a more competitive home loan offer than banks.
"Secondly a borrower needs to have a mortgage running for at least six years before the guarantee is effective. But everyone in the lending industry knows that the average life of a mortgage is four point six years.
This time limit makes a mockery of the Kiwibank "guarantee".
Grant says it gets more complicated from there, "Thirdly it includes an ‘apples for apples’ clause. This means that at the end of six years a comparison of equivalent products needs to be done showing an exact match of the Kiwibank loan.
"For example it is common to fix part of a loan and float the balance. If the period of fixing is two years and then floats for two years and is fixed for the final two years, you can imagine how difficult it would be, for the average person, to do the comparison calculations.
"Kiwibank says this can to be done by the borrower, an independent third party or the bank. This would be very complicated for the average borrower, leaving them with the choice of paying an independent person to do the calculations or having to rely on Kiwibank to do it for them," Grant says.
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