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20 Jul 2016

Big Banks and the Mortgage Wars

With mortgage debt in New Zealand topping $200 billion, the big banks are in a constant battle to bring home the mortgage dollars. NZ Herald's Insights team recently conducted a detailed analysis of the domestic mortgage market, with all 1.7 million land titles broken down by location, year, and lender. The big four banks - ANZ, Westpac, ASB, and the BNZ - command the mortgage landscape with 93 percent of loans, with ANZ dominating market share across most of the country.

Close to 150,000 mortgages were lodged throughout New Zealand in 2015, with ANZ lodging 53,472, ASB 31,526, Westpac 29,574, BNZ 23,627, Kiwibank 9,908, and TSB 3,122. There has been a sharp spike in bank mortgage registrations since 2012, with 40 percent of all mortgages now less than four years old. This surge in activity is mostly based around the bustling Auckland market, which accounts for a third of mortgage activity and a quarter of property titles. Historic market leader in Auckland - ASB - has lost a lot of ground to ANZ over recent months.

During the first five months of 2016, 32.4 percent of all Auckland mortgages were lodged by ANZ, with ASB accounting for 22.7 percent, Westpac 20.8 percent, and BNZ 16.5 percent. According to Sarah Berry, general manager of banking products at ANZ, the recent success of ANZ is no accident: "Our strategy really reflects that we've been underweight, but now we're in line with the market ... We've got more branches, more mobile bankers, and also backed up with a strategic focus on customer service."

According to NZ Herald, ASB declined an interview and only responded with a written statement issued through a spokeswoman: "ASB's strong competitive position in Auckland comes from its earliest foundation as an Auckland bank in 1847. We have continued to grow since that time by understanding our customers and their needs ... Competition between lenders in the Auckland housing market has been intense in recent years. ASB's approach has been to focus on quality lending as opposed to chasing market share."

With prices in Auckland continuing to rise, all four banks were ready to acknowledge the two-speed property market without going as far as mentioning a housing bubble. BNZ's director of retail and marketing Craig Herbison said "Auckland is becoming a situation of the have-homes and the have-nots. There's a sense of despondency," while Sarah Berry from ANZ chose to describe Auckland's market as "complex" while recognising "that it can be tough to be a first-home buyer in Auckland."

According to economist Shamubeel Equaab, the spike in mortgage data should raise concern beyond the first-home market, especially if prices in Auckland keep rising like they have in recent years: “Worryingly it also suggests that much of the mortgage book also represents very new borrowing - at a time when prices are so high they are mismatched with borrowers’ incomes or rents and are uneconomic.” If you're ready to enter the market, it's important to get the best advice possible from a professional mortgage broker.