Kiwibank new terms and conditions. Not good news for those with offset mortgages.

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Forums › Finance and wealth management › Kiwibank new terms and conditions. Not good news for those with offset mortgages.

David321

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#289034 8-Aug-2021 17:01

Not sure if anyone else here has an offset mortgage with Kiwibank but if there is I am wondering what they think of Kiwibanks new terms and conditions coming into effect in a week or so.

Specifically section 4 which introduces kiwibanks ability to set an offset ratio. Currently its dollar for dollar meaning for every one dollar in credit you have its one dollar off your total mortgage debt when they charge interest.

The new offset ratio gives them the ability to set it at what they want, for example they could drop the ratio from the current 1 to 0.5 meaning for every dollar you have in credit they will only reduce the mortgage debt by 50 cents for every dollar you have.

To make an even more simple example, if you have 100k savings in an offset account and a 100k mortgage (also offset account) currently you would be paying kiwibank nothing in interest. But with their new term and conditions they can reduce the ratio to 0.5 and charge you interest of 50k.

I also read a part that i couldn't quite work out properly but the way i understood it was customers have to accept the terms and conditions before they can do this? Possibly meaning if I don't sign to agree they can not do it to me? Although if I needed changes made to the lod such as a restructure I would have to agree to their new conditions (not an issue for me as I will no longer need loan adjustments).

A real kick in the teeth for those who have worked hard to get interest free, your thoughts?

_David_

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#2756809 8-Aug-2021 17:39

Why would they have changed it? Can you move everything to another bank that still does it?

mudguard

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#2756810 8-Aug-2021 17:44

If you had $100K in savings why not have a portion of your mortgage on floating for the same amount and dump that money into?

I've been inquiring about offset mortgages, BNZ mainly, but they charge a $10 monthly fee which offsets the amount I'd save down to $4 per month. So a bit pointless really.

alasta

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#2756811 8-Aug-2021 17:54

mudguard:

If you had $100K in savings why not have a portion of your mortgage on floating for the same amount and dump that money into?

Because you can't get that cash back if you find yourself in a financial pickle later down the track.

mudguard

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#2756812 8-Aug-2021 17:58

alasta:

mudguard:

If you had $100K in savings why not have a portion of your mortgage on floating for the same amount and dump that money into?

Because you can't get that cash back if you find yourself in a financial pickle later down the track.

Is that all banks? I thought when I was at Westpac (doing mortgages) you could move as much as you wanted in and out of a floating loan? Not just a revolving credit.

tdgeek

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#2756831 8-Aug-2021 18:09

What is an offset mortgage?

mudguard

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#2756833 8-Aug-2021 18:11

tdgeek:

What is an offset mortgage?

$100,000 mortgage

$20,000 in savings account.

Pay interest on $80,000. But normally at the floating rate, and sometimes with monthly fee ($10pm BNZ)

Edit. Fixed typo!

tdgeek

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#2756847 8-Aug-2021 18:21

mudguard:

$100,000 mortgage

$20,000 in savings account.

Pay interest on $480,000. But normally at the floating rate, and sometimes with monthly fee ($10pm BNZ)

You've lost me. If I had a 100k mortgage, and 20k in the bank, do you mean I then get a 480k mortgage (on I assume my equity) so I pay floating rate and 10 bucks month fee? Whats wrong with that?

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eracode

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#2756849 8-Aug-2021 18:24

mudguard:

tdgeek:

What is an offset mortgage?

$100,000 mortgage

$20,000 in savings account.

Pay interest on $480,000. But normally at the floating rate, and sometimes with monthly fee ($10pm BNZ)

@mudguard - think you have a typo there.

Sometimes I just sit and think. Other times I just sit.

mudguard

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#2756859 8-Aug-2021 18:44

eracode:

@mudguard - think you have a typo there.

Cheers. Have tidied it up!

eracode

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#2756861 8-Aug-2021 18:48

mudguard:

I thought when I was at Westpac (doing mortgages) you could move as much as you wanted in and out of a floating loan? Not just a revolving credit.

A revolving credit is really just an overdraft posing as a home loan (or vice versa) - secured by the bank’s mortgage over your home. You can pay in and/or withdraw when and how you wish - so long as you stay within the prescribed limit. Any credit balance can be offset against the borrowings under other floating or fixed-rate loans you have - as mentioned earlier.

You can’t really do that with a non-revolving floating home loan - they’re not designed to be ‘come and go’ - if that’s what you mean above. If you repay part of the loan, you may be able to re-draw it later - but that means going through some hoops with the bank. The re-draw is not necessarily available as of right.

Sometimes I just sit and think. Other times I just sit.

jonherries

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#2756869 8-Aug-2021 19:27

We do this with Kiwibank at the moment.

If they were to make a change like you suggest, we would probably move banks.

That being said, I don’t understand why they would continue to offer it as a product if they were to change it.

My understanding is that it isnt a very popular arrangement, most people struggle to understand it and it “feels scary”. It took me a while to make the case in our house.

Jon

tdgeek

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#2756871 8-Aug-2021 19:29

mudguard:

eracode:

@mudguard - think you have a typo there.

Cheers. Have tidied it up!

The old $ 4 trick eh!! :-)

eracode

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#2756876 8-Aug-2021 19:34

@David321

Certainly understandable being upset at potentially losing something you’ve been able to take advantage of. However here’s nothing to the banks’ advantage in providing these offsets and it’s not really surprising that they are changing or withdrawing them. They will make more money as a result and never underestimate banks’ thirst for profits.

Although they will upset some of their customers for a while, I’m not sure it’s a biggie enough to push those customers to change banks - and if anyone does change, how do they know their new bank won’t make a similar change soon?

If they do change to a 50% offset, that’s better than no offset.

Sometimes I just sit and think. Other times I just sit.

Geektastic

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#2756899 8-Aug-2021 21:11

Just change your mortgage to another bank. It's fairly easy to do.

Wheelbarrow01

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Chorus

#2756913 8-Aug-2021 22:05

mudguard:

If you had $100K in savings why not have a portion of your mortgage on floating for the same amount and dump that money into?

I've been inquiring about offset mortgages, BNZ mainly, but they charge a $10 monthly fee which offsets the amount I'd save down to $4 per month. So a bit pointless really.

Interesting - I have a home loan with BNZ. Part of the loan is fixed which I obviously pay interest on. The other part is floating but is (at the time of writing) fully offset against savings. I have never been charged any fees for this arrangement. Apart from interest (when applicable), I don't pay any fees with BNZ at all, and haven't since I moved to them in 2014.

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