Westpac move lacks goodwill

I have spoken to brokers this week who 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 not to be named, 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.

Borrowers have been told over and over again by commentators that floating rates are not likely to move for some time to come.

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 on their fixed.

Another possible reason is to increase profits.

However, this seems short-sighted, the broker says, as it is disenfranchising its most valuable customers.

He says it takes a lot for his clients to ring him and complain, but he has had numerous calls since Westpac made the decision.

A 0.15 rise may not seem like much but New Zealanders have a mistrust of banks a lot of the time, anyway.

This increase, coming without fanfare, could make some customers feel that they have been taken advantage of.

I asked to speak to someone at Westpac about its pricing strategy but no one would respond in person to my calls. Instead, I was 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."

In an environment that is increasingly competitive for banks, and in which some - such as Kiwibank - are easing their lending criteria to tempt more customers through their doors, this move seems completely contrary to common sense.

Comments from our readers

On 31 October 2012 at 1:59 pm bArt said:

I cannot believe a bank would raise interest rates in order to increase profits. This is plain cynical and would undo all of the community feel-good programs that Westpac have in place. (yeah right!)

On 1 November 2012 at 2:28 pm John Oehley said:

Westpac is a disgrace and their sole motivation is greed. I am seriously considering moving my business. The trouble is that this costs money time & energy and most people don't feel it is worth the hassle. Westpac relies on this. Understand that this represents $900 increase in interest costs on a $600k loan every year! Has the cost of their money supply increased by .15% - I don't think so!

Westpac move lacks goodwill

It's not the demise of the National Bank brand that has borrowers talking to their brokers about switching banks, it's a decision by another bank that is getting the phones going.

Wednesday, October 31st 2012, 12:00AM 2 Comments

Comments from our readers

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