Simplicity extends first home mortgage – lowest floating rate on the market

by Roxanne Libatique02 Mar 2021

Simplicity has raised its game amid the mortgage wars by extending its 2.25% first home mortgage, the lowest floating rate in the market, to all KiwiSaver members who have been with the non-profit KiwiSaver manager for a year.

Since last year, Simplicity has pre-approved over $100 million of mortgages via its ballot system. It expects the value to increase significantly as all members buying their first home can now access pre-approvals online in less than five minutes.

“Expansion of mortgages is possible because of our fast growth,” said Sam Stubbs, the managing director of Simplicity.

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Simplicity states that the big four banks could lend an additional $1.3 billion to their customers if they offered the same mortgages from their KiwiSaver funds, saving them at least $22 million in mortgage interest annually and allowing their KiwiSaver members to have $11 million in higher returns annually.

However, Stubbs said banks make their KiwiSaver customers lower returns than they should while charging borrowers higher mortgage rates than they could.

“That’s good for bank profits, but a lousy deal for their customers and KiwiSaver members,” he said. “It’s a conflict of interest, pure and simple, costing big bank customers and KiwiSaver members millions every year.”

Stubbs called out banks for refusing to offer KiwiSaver schemes with lower cost mortgages.

“Bank KiwiSaver schemes are investing their members’ savings into fixed interest, getting 1% returns or less. They should be lending that money to their customers in the form of mortgages. They would earn higher returns and be cheaper for borrowers,” he said.

“It’s what building and thrift societies have done for centuries. If Simplicity can do it as a KiwiSaver manager, they can too.”

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