BNZ pulls plug on brokers

Nick Stride

Friday 23rd April 2004

Bank of New Zealand, the country's third-largest bank, has cut mortgage brokers out of its distribution mix, saying it can give borrowers better service through its own branch network.

BNZ this week launched an aggressive print and television campaign advertising its mortgage products as having "broker-free" interest rates.

The print version reads: "We've cut out brokers to give you this great rate."

The BNZ campaign doesn't come at a good time for Mike Pero Mortgages, which plans to raise between $7 million and $10 million through a share issue and list on the New Zealand Exchange this month.

The company has a database of 50,000 past clients and has since 1990 handled more than $5 billion of mortgages.

BNZ communications manager Owen Gill said the decision on brokers had been taken a year ago "but in the last few weeks we've decided to put some emphasis on it."

One reason the bank had cut out brokers was that it felt it could provide better service dealing with customers directly.

There were also some "specials" Global Plus loyalty points, for example that were not available through brokers.

Another reason was the fees broker charged.

"We think the cost has to be borne somewhere in the chain if you're using brokers. Where it falls is open to debate."

Mortgage brokers advertise their services as free to the customer but banks say the costs end up being reflected in the rates they are able to offer customers.

Kiwibank has never sold its mortgage products through brokers.

Chief executive Sam Knowles has said he believes there needs to be more transparency around the way mortgage brokers operate.

The bank had not ruled out using brokers but would have to find some that were prepared to work for lower commissions than are current in the industry.

"There is a cost, and if that is incurred by the bank it will ultimately be reflected in rates," communications manager Bruce Thompson said.

An ANZ Bank spokeswoman said the bank had no plans to review its dealings with brokers. Other banks could not be reached for comment by press time.

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