Finance houses woo mortgage borrowers

Press, 23 July 1986, Page 15

Finance houses woo mortgage borrowers

In Residence

by

Sarah Sands

Home buyers who waited until interest rates dropped before making their purchase now have many reasons to be glad they did so. Not only have interest rates come down by as much as 3 or 4 per cent and eligibility criteria eased, but financial institutions are lending money at unprecedented levels. Since first reducing its interest rate in the second week of June, the ANZ Bank has lent more than $lOO million to about 2600 home buyers. In the previous month, its mortgage lending was only $l7 million. The Westpac Bank has lent about $BO million in mortgages to more than 2000 customers, while the United Building Society is lending $l2 million a week. Trusteebank Canterbury at $17.5 million in mortgages for the last month, has lent the most directly to Cantabrians. On the other hand, the Post Office lends only $2O million a month nationally, of which betweeen $2.5 and $3.5 million would come to Canterbury. The actual mortgage interest rates appear to have stabilised since the spate of reductions last month. Only two lending institutions — the ANZ Bank and the Countrywide Building Society — lowered their rates further. A first mortgage from the ANZ now has an interest rate of 17.5 per cent for clients and borrowers with deposit support (previously 18 per cent) and 18.5 per cent for non-clients (previously 19 per cent). The Countrywide Building Society first mortgage interest rate also dropped from 19.5 per cent to 19 per cent. The second mortgage Interest rate dropped from 21 per cent to 19.5 per cent. Mr Peter Hazael, the marketing manager for the ANZ sees the latest move by his bank as putting pressure on competitors. "We want to make a significant statement in the market place and the way to do it is to put our hands in our pockets. “Somewhere out there people are coming across to us and if some of our competitors want to continue at 21 and 22 per cent then that’s up to them.” Trusteebank Canterbury with its lower interest rate and ready availability of funds is also scooping customers from its competitors. Mr Peter Devlin says there has been a large number of mortgage seekers coming to the bank from the Post Office. While the Post Office at 16 per cent is 3 per cent cheaper than Trusteebank, its funds are limited to about one-sixth of what Trusteebank can lend in a month. People who have home

ownership accounts with the Post Office lose none of the benefits if they switch to another bank. “We are lending more than we have ever lent before,” says Peter Devlin. “Because the Post Office by comparison doesn’t appear to be lending a lot we are getting inquiries from their customers.” When the trading banks made their big push in to mortgage lending there was a lot of speculation that the building societies would lose customers to the cheaper money, but Tony Kunowski, United’s corporate affairs manager, says this is not so. “There has been no effect since the trading banks moved in — demand has more than doubled since we reduced our rates.” He attributes this increase in demand to those people who were waiting for the rates to come down. “We have also noticed that the number of people refinancing their existing, mortgages has increased

as a proportion of our lending. It is now close to 50 per cent of our lending.”

Other banks have also noticed this. Mr Bill Day, the public relations manager for the Westpac Bank, says that many people have been consolidating their first and second mortgages.

"People are coming to us from other institutions to refinance their mortgages and we are very, very busy doing extremely good business.” The lifting in the maximum amount that can be borrowed and the more flexible length of the loans means that most people will no longer need a second mortgage in order to buy their property.

So where does this leave the solicitors who have traditionally been one of the biggest sources of second mortgage finance?

The vice-president of the Canterbury Law Society, Mr lan Pringle, says that business has not

dropped away although the demand for second mortgages has reduced. Solicitors also lend for first mortgages and lowered their interest rates along with the other financial institutions. “The interest rate we

are charging now on new loans has dropped and we are, as the opportunity arises, reviewing existing mortgages.” The interest rate charged varied depending on the type of security but was likely to be between

18 and 20 per cent, he says. “It will be lower for residential and slightly higher for commercial with large commercial probably being slightly cheaper than the small commercial loans.”