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SuperBank primed for mortgage attack

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  • SuperBank primed for mortgage attack

    Hi Guys

    Article from the Sunday Times:

    SuperBank primed for mortgage attack

    SUNDAY , 18 JULY 2004

    A young bank promoted in Kiwi supermarkets challenges its larger rivals by discounting interest rates. Rob Stock reports.

    It's not every day a new bank enters the mortgage market in New Zealand intent on making life uncomfortable for the big four high-street banks.

    But today, SuperBank unveils its new mortgage business and its offering has a new twist designed to win market share from ASB, ANZ National Bank, Westpac and BNZ.

    It will aim to mine a deep vein of Kiwi discontent with the main bank lenders.

    SuperBank is launching a home-loan package which rewards loyal customers by giving them discounts on their interest rates, discounts which get bigger the longer they keep their loan with the bank. That is a New Zealand first, SuperBank boss James Munro says.

    It will mean that customers who stay at SuperBank for the long term won't be expected to haggle to get rates which are equal to, or better than, those enjoyed by someone who has just taken out their first loan.

    Borrowers plumping for the SuperHomeloan product will automatically have their interest rate discounted every two years. After 24 months, the interest rate is discounted by 0.1 per cent, after four years the discount is 0.15 per cent, after six the discount is 0.2 per cent and so on, to a maximum of 0.6 per cent.

    According to SuperBank's calculations, that will mean savings of $10,000 on a $210,000 loan over 25 years. However, savings will depend on SuperBank's rates staying competitive with other lenders.

    Munro doubts the big four banks can afford to follow SuperBank's example. The four have enormous mortgage businesses, he says, and a formal discount structure for new customers would have to be extended to existing customers - at a prohibitive cost.

    Research by SuperBank shows many mortgage customers are unhappy with the way they are treated by their banks, Munro says. The two main gripes have been identified. First, loyal customers are angered by the good interest-rate deals given to new customers to attract their business which are not offered to long-standing customers. Second, many resent the expectation that they must negotiate to get the best interest rate available.

    Munro says New Zealanders believe that if those deals are available, they should be offered them automatically without being forced to haggle for them. Kiwis have long put up with these differentials between "sweetener" rates for new customers and those available to existing customers, but frustration at them is increasing. Such a deal tripped up Telecom earlier this year.

    The national telco offered returning customers a discount pricing deal so good that existing customers were furious at missing out. The company was forced to extend it to all customers.

    SuperBank chose its mortgage approach with an eye on global trends. As Munro points out, home buyers are opting for increasingly short-term loans and moving between borrowers far more often.

    "In other words, what is happening all over the world - in New Zealand, in the US, in Canada, in Australia - is for people to move their home loans. If we are going to succeed, then it will be because we have been able to extend that life. If we do that, we will have more than paid for the discounts."

    SuperBank has never hidden its intention to offer mortgages, but it has applied CIA-like efficiency to keeping its secret weapon of progressive discounts under wraps.

    When the bank launched in February last year, it focused on building a deposit-account business to provide capital for a loan business through two products: the SuperSaver alternative to term deposits, and the SuperAccess everyday account.

    As a new entrant to a market, SuperBank has to be different to get noticed, says Munro. Being as good as the main banks won't win customers.

    SuperBank must match the high-street banks for a reputation for trustworthiness, simplicity of service and flexibility of products, says Munro, but this alone won't encourage customers in sufficient quantity to create a viable business.

    As well as a TV ad campaign starting today, SuperBank is ramping up its in-store presence at New World, Pak 'N Save and Four Square supermarkets to generate customer contacts.

    Contrary to some perceptions, however, SuperBank does not have a "branch" network in stores.

    It is a direct bank, keeping costs low by operating phone and internet banking, though it has developed a new approach for mortgages.

    SuperBank will sell its mortgages through three channels: phone and internet, a fleet of mobile mortgage managers and a broker channel.

    For many, particularly those refinancing, the process can be handled by phone, but Munro says: "Many, many people still like to deal with a person face to face." To cater for them, in Auckland SuperBank has its mobile mortgage-manager fleet in branded Minis, responding to customer enquiries made through the phone and internet.

    Outside Auckland, a network of mortgage brokers will act as SuperBank agents. In each area there will be just one broker. The network includes some of the biggest names in broking: Mike Pero, Mortgage Choice, Mortgage People, Mortgage Express, Mortgage Link and Ray White Financial Services.

    When brokers get a lead from SuperBank, they will be expected to talk about SuperBank with the caller, says Munro. But don't expect every high-street broker will be able to sell you a SuperBank mortgage. SuperBank plans to keep its broker dealings limited to these few names.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx