Which bank offers the best value for customers?

Thursday, 8 November 2018

Financial Markets Authority chief executive Rob Everett and Reserve Bank governor Adrian Orr deliver the findings of their joint review into the conduct and culture of banks in New Zealand. First published in 2018.

Moving bank is easy. But where should you go?

It can take a lot of research to decide which is offering the best deal.

If you're wondering where to find the best value, there are a few things to consider.

Do you want a home loan?

Mortgage brokers said some of the best rates being offered on new home loans were coming from ANZ at present - one had received an offer of a 3.99 per cent rate for a year. This is better than the advertised rates for the other major banks listed on mortgagerates.co.nz.

But if you are willing to shift your banking outside the main banks, there are more options.

* ANZ mega-profit sets up day of reckoning for New Zealand banks

* ANZ makes almost $2b from New Zealand banking**

SBS is offering a special rate of 3.95 per cent for two years to people borrowing more than $100,000 with equity of 20 per cent. HSBC is offering 3.85 per cent for a year to borrowers with more than 20 per cent equity who qualify for its premier product - which requires a home loan of at least $500,000 and/or savings of $100,000 with HSBC. You usually need to move your main transaction account to take advantage of these deals.

Cashback offers have been reined in, brokers said, though ANZ is now offering $3000 to borrowers between 80 per cent and 90 per cent lending as part of a first-home buyer promotion. This has previously been a part of the market where there has been less competition and fewer sweeteners.

It used to be that the different banks' servicing calculators meant that one buyer would be judged to be able to afford a different amount at one bank than at another - sometimes hundreds of thousands of dollars different. But brokers said all banks had tightened their calculators and there was now less difference.

They warned the situation would change week-to-week. As well as the rate offered, borrowers should check their ability to make lump sums on their mortgage and to transfer the borrowing to another property if they wanted to sell before the fixed term was up.

'You could say one bank has the better rate and then the next week someone else would be better,' said Loan Market's Bruce Patten. 'It's a fluid situation it moves around depending on the banks' appetite for lending at any given time.'

He said, rather than have borrowers shop around for the best rate, he would try to negotiate with their existing their bank for the best deal possible.

Banks advertise standard rates - for people with low equity, who often also have to pay added margins and fees - and 'specials', which are their standard rates for everyone else. Borrowers can usually still negotiate these down if they are a good prospect.

Credit cards

The best deal on your credit card will depend on whether you use it enough to make rewards points worthwhile.

For people who don't use their cards much, an options such as ASB's Visa Light could be the best deal - this has no account fee, a low interest rate of 13.5 per cent a year and a 'smart rate' feature that currently allows cardholders to access a 0 per cent interest rate for six months on any purchase of $1000 or more.

The Co-Operative Bank's Fair Rate Credit Card has a lower rate, of 12.95 per cent but it charges an account fee of $10 every six months.

If you spend more than about $15,000 a year, it's worth investigating a rewards card. Consumer NZ calculates, that at that level of spending, the American Express Airpoints card gives the best flight rewards (BNZ's Advantage Visa Platinum is the best bank offer), Warehouse Money Purple Visa Card gives the best shopping rewards (ASB Visa Platinum topped the banks) and BNZ Advantage Visa Platinum gives the best cash-back.

You can take a credit card from a bank that you do not have your main accounts with. Banks regularly offer balance transfer deals - BNZ is offering an interest rate of 0 per cent for a year to people who switch their credit card balance to one of its cards. ASB has 0 per cent for six months, ANZ 1.99 per cent for a year, and Westpac 5.95 per cent for the life of the balance.

TSB has high customer satisfaction ratings.

Transaction accounts

For your main bank account, you will probably get as good a deal by looking at your own bank's options than you would from shopping around.

Most banks offer fees-free transactional accounts, provided you do all your banking online and don't expect to earn any interest on money sitting in the account.

Research house Canstar this year gave Westpac the award for its 'everyday banking ' offer. It includes CashNav, an app that helps customers track their spending.

Term Deposits

The temptation to always leave your deposits with the same bank is massive. But if you have money you want to invest with a bank, it's worth looking at your options.

On a 90-day term deposit of $5000, the interest rates run from a meagre 1.75 per cent to a hardly-princely 2.9 per cent. That's a difference of $57.50 before tax takes its bite.

Some banks also make opening a term deposit hard, and require new depositors to make boring trips in to a branch to prove who they are, even if they are moving money from another New Zealand bank where they are well known.

Checking out deposit rates is easy. Just Google 'compare term deposit rates' and several pop up.

Rates vary by amount saved, and the length of term deposit. Rates do tend to move around, with different banks 'taking a stand' for money every so often.

Banks also have different credit ratings. Heartland Bank's rates may look market leading, but it's credit rating is BBB compared to ANZ's AA-.

Ranking banks in order of return on a $5000 term deposit, based on today's rates, looks like this:

ANZ: Only takes term deposits over $10,000.

ASB: 1.75 per cent.

Westpac: 2.65 per cent.

BNZ: 2.65 per cent.

HSBC: 1.65 per cent.

Kiwibank: 2 per cent.

Heartland: 2.9 per cent.

KiwiSaver

Many people have their KiwiSaver with their bank, probably with no better reason than it is convenient to do so.

Each bank has a KiwiSaver scheme, but savers must feel free to have their KiwiSaver scheme with the provider that suits their needs best. It may be that a high-fee, high-conviction active scheme like Milford suits them better than the scheme offered by their bank, or a low-fee, passive scheme like Simplicity.

There are many tools for comparing KiwiSaver schemes, including on the Sorted website, As well as quarterly reports comparing performance of all schemes from fund research agency Morningstar.

Past performance is not a guide to future performance, but it is long-term return figures (five and 10 years) are a guide to how well, or badly your scheme has done compared to other similar schemes.

Take returns on popular KiwiSaver balanced fund returns over five years, after fees, to the end of September.

The bank-related funds ranked:

ASB: Fourth of 17 funds with 9.4 per annum return.

Westpac: Fifth with 8.9 per cent.

BNZ: Sixth with 8.9 per cent

Kiwibank's Kiwi Wealth: Ninth with 8.4 per cent

TSB's Fisher Two: 13th with 8.3

ANZ: 14th with 8.2 per cent.

In first place was Milford's balanced fund.

Remember, getting the choice of conservative, balanced, or growth is the most important KiwiSaver choice, even ahead of which provider savers opt for.

Customer service

If your main concern is getting great customer service, you might be better off with a smaller operator.

Research from Roy Morgan shows that customer satisfaction with banks was at 79.1 per cent in the year to September 2018, up frm 77 per cent the year before. TSB and The Co-Operative Bank had the biggest increases in satisfaction.

TSB Bank has the highest customer satisfaction of the nine largest New Zealand banks with 85.3 per cent, followed closely by Kiwibank on 84.8 per cent. These two are well ahead of third placed BNZ (80.9 per cent) and The Co-Operative Bank (80.8 per cent).

That is in line with similar work done by Consumer, which found TSB had the happiest customers, with 87 per cent very satisfied. The Co-Operative Bank and Kiwibank were next.

'At the other end of the scale were Aussie-owned banking giants ANZ and ASB,' Consumer NZ said.

'Just 52 per cent of their customers were very satisfied, compared with the industry average of 60 per cent. Both banks rated below average for value for money and their customers were more likely to be thinking about switching.'

If you don't think you are getting the best deal possible from your bank, get in touch and see if they can do better. If not, it's relatively easy to switch banks in New Zealand. The process should take less than a week.