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Banks acting badly on mortgage diversion?

Gordon Copeland Press Release
For Immediate Release
Friday, 19th September 2008

Banks acting badly on mortgage diversion?

Independent MP Gordon Copeland, the author of the mortgage diversion component of KiwiSaver, today expressed his disappointment at the delay which has occurred in its implementation.

“Mortgage diversion was scheduled to begin as from 1 July this year (for those members who joined on 1 July 2007) but was delayed while banks and the Government addressed ‘technical’ issues around mortgages which include a revolving credit component,” said Mr Copeland.

“All well and good, but even KiwiSavers who joined the scheme at its inception, and who have a straightforward table mortgage on their home, are still waiting for their diversion to commence. That is not good enough and needs to be fixed immediately.”

“More disturbing, however, is the fact that a Treasury spokesman was quoted in the press on Monday to say ‘he understood that most banks were likely to require the payment coming on top of minimum repayment contributions’. That is unacceptable.”

“The mortgage diversion scheme was not set up, so that banks can have their loans repaid sooner than would have otherwise have been the case. Rather, mortgage diversion is aimed at allowing members of KiwiSaver to use half of their 4% contribution to repay their mortgage, so that they can afford both to save for their retirement and repay their mortgage at one in the same time!”

“I know from my own experience that many young families cannot afford to stay in KiwiSaver without the ability to utilise half of their contributions to service their existing mortgage repayments.”

“If banks are now going to treat diversion as some kind of opportunity to drag more money out of borrowers, then the Government must immediately intervene to stop that happening. Any extra payment, on top of existing minimum repayment contributions, should be completely voluntary and a decision made by the borrower, not by the lender.”

“Michael Cullen needs to give that message to the banks loud and clear.”

ENDS

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