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Does buying local mean you get a better deal on your mortgage?

Many patriotic Kiwis celebrated the recent news that the New Zealand government had

purchased Kiwibank, many no doubt hoping for a better deal. But does buying local or from a government-owned enterprise assure you of a better deal?

On August 22, the Crown bought 100% of Kiwi Group Holdings, the company that owns

Kiwibank, from the Superannuation Fund, ACC and NZ Post for an estimated $2.1 billion,

which it will borrow to fund.

When many Kiwis heard this news, the first thing they probably thought was: Excellent! Now we can get better mortgage rates and make sure our money stays in New Zealand.

It is always admirable to hear Kiwis supporting local companies – they are correct to think buying local improves community well-being, adds jobs and encourages entrepreneurship – but remember that your buying decisions will also impact your well-being.

Kiwis often have greater trust for other Kiwis and tend to assume a New Zealand-owned

company must give Kiwis a better deal. This might be true of some buying decisions, but in everything, the best deal is the one that's right for you.

When Jim Anderton set up Kiwibank in 2002, he predicted 40% of New Zealanders would "seriously consider moving their banking to a people's bank" precisely because they wanted better rates. "People feel good about banking with a publicly-owned New Zealand bank. They feel even better when they find out it charges lower fees for full banking services" Anderton said in a speech in 2000.

The reality is that Kiwibank—like all our banks (New Zealand and Australian-owned) – offers excellent customer service and other unique benefits but charges at similar levels to its competitors. A change to Government ownership is unlikely to impact the mortgage rates that the bank offers.

Taking out a mortgage is more than measuring the various lenders' rates. Choosing the right bank for a mortgage requires thinking about dozens of factors, only some of which will be finance related.

For example, structuring a loan can be complicated; mortgage brokers will still need to

collaborate with both borrowers and lenders to get approval for a loan. This doesn't change, no matter who owns the bank.

Neither will public ownership suddenly allow Kiwis to contact specific lenders directly to get a retail mortgage or let them avoid different types of fees. Such constraints will continue to exist no matter who owns the bank. 

A mortgage broker is in the best position to help get the best deal for you from the bank that is most likely to offer a deal that best suits your circumstances.

And no bank can hold your hand through the process as effectively as a mortgage broker. As an advisor and moral support, I wear multiple hats because the mortgage process can be an emotional rollercoaster—a bit like turbulence in an aircraft.

So, rather than focusing on who owns which bank and whether the profits are flowing within New Zealand or into overseas coffers, it is far healthier for your peace of mind to concentrate on picking a lender that best suits you and your family's needs.

If you're entering the mortgage market, then consider asking some of these questions:

  • What is the purpose of the lending? Is it for a first home?

  • What is the size of your deposit?

  • What is the bank policy on the required percentage for a deposit (they all differ)?

  • Do you want a new build? Or is the purpose of the mortgage for an investment? (This is important because some banks offer a discounted rate for new builds for up two years.)

  • Are you happy to use a digital process for taking out a mortgage, or would you prefer a human touch?

  • Finally, your location will also have a bearing on the best deal for you.

Answering critical questions like the above will go a long way to helping uncover which bank is best for your precise situation.

Maybe Kiwibank will turn out to be the best option. Perhaps it won't be. But I know that picking a lender based on emotions or misplaced rules of thumb—such as whether the bank is locally-owned—is not automatically the best choice for your circumstances.

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