Sharechat Logo

Westpac changes its home loan strategy

By Jenny Ruth

Friday 5th May 2006

Text too small?
 Jenny Ruth
Westpac New Zealand has come through the mortgage market price war much better than everyone else expected, although it has been through "some absolute highs and lows," says chief executive Ann Sherry.

The bank says that while housing lending volumes rose 13%, the mortgage price war sliced 25 basis points off its net interest margin. The main driver was a 15 basis point decline in housing spreads as the mix of fixed and floating lending shifted further towards fixed-rate loans.

Sherry says that 18 months ago about 62% of its mortgage book was lent at fixed rates but that has now risen to 79%. "That really explains the margin drop in our business," Sherry says.

Based on the registered banks' quarterly general disclosure documents, Westpac's share of the mortgage market has eased from 19.84% in December 2004, the quarter in which the Bank of New Zealand launched its "unbeatable" campaign, to 19.55% in December 2005.

Sherry said Westpac's strategy in dealing with the price war has changed. To begin with, the bank had stood aside from it, partly because it hadn't expect it to last as long as it has.

"That was a deliberate strategy at the time, but we really couldn't afford to continue to do that because we were losing too much volume," she said. Now "we're not letting anybody get too far away from us."

She expects margins will "stay pretty skinny" and thinks they may fall further in some areas. Banks in other markets, such as Britain, have experienced falling margins for a decade, she said.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Westpac NZ boosts annual earnings 22 percent on bigger market share
Westpac sees more digital banking in the future, launches new budgeting ap
Westpac NZ outperforms parent as FY earnings climb 41%
Westpac targets SME, agricultural lending
Westpac lifts June quarter cash earnings
Daily ShareChat: Westpac Bank
Westpac profit drops
Westpac seeks to package foresters' carbon credits
Westpac first-quarter profit rises about 33% on loan demand, fewer defaults
Westpac to appeal tax avoidance ruling