The NZ home loan market is a worrying case study of how savagely bank lending margins get whittled away when demand for credit is weak.
In a call with analysts, Comyn said that competition in the local home loan market remained intense, which was putting pressure on lending margins.
Now, it’s clear that one of the reasons bankers are anxious is that the banking oligopoly has an even firmer grip on the NZ market than on the Australian market. The NZ sector is dominated by four banks which make up around 85 per cent of mortgage and other lending, and 90 per cent of deposits. Now, one of the most disturbing aspects of this vicious battle now underway in the NZ mortgage market is that it was not triggered by the need to protect turf against a new, and highly effective competitor.for disturbing the normally sedate domestic mortgage market. The lender was able to quickly boost its market share by using superior technology to deliver quick loan turnaround times – and this forced the country’s major banks to cut home loan rates to fend off this new predator.
Still, Comyn may be forced to reconcile himself with what he considers to be unsustainable lending margins. After all, with official interest rates now at 5.5 per cent, NZ home loan borrowers have become acutely price-conscious.And as the country’s big banks are now discovering, they’re now extremely motivated to compare the home loan rates offered by different lenders, and to switch banks to get a better deal.
That appears to be what’s happening in the NZ market. According to CBA’s presentation, the NZ home loan market grew by 3.3 per cent in the 12 months to June 2023. “There have been longstanding concerns that the market is not working well for New Zealanders,” the country’s finance minister, Grant Robertson, said at the time.
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