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Simplicity Ups Ante In Mortgage Wars, Accuses Big Banks Of Conflict Of Interest

Simplicity, New Zealand’s nonprofit KiwiSaver manager, has extended its 2.25% first home mortgage, the lowest floating rate in the market, to all its members.

Previously balloted due to limited supply and high demand, the loans are now available to all KiwiSaver members who have been with Simplicity for one year.

Members can pre-approve loans online in under five minutes.

Since launching one year ago, Simplicity has pre-approved over $100m of mortgages via its ballot system. This should increase significantly now that all members can access pre-approvals to buy their first home.

“Expansion of mortgages is possible because of our fast growth,” said Sam Stubbs, Managing Director of Simplicity.

Simplicity now has over 57,000 members, and $2.7 billion of funds under management.

“And because we aren’t making fat profits like the banks, our floating mortgage rate is at least 50% lower than theirs,” he said.

Mr Stubbs was very critical of the bank KiwiSaver schemes for not offering lower cost mortgages to their customers.

“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,” he said. ‘If Simplicity can do it as a KiwiSaver manager, they can too.”

Simplicity has calculated that if the big four banks offered the same mortgages from their KiwiSaver funds, they could lend an additional $1.3 billion to their customers, saving them at least $22 million in mortgage interest each year. Their KiwiSaver members would also have $11 million in higher returns each year. Instead, they are making 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,” said Mr Stubbs. “It’s a conflict of interest, pure and simple, costing big bank customers and KiwiSaver members millions every year.”

Simplicity was just awarded Morningstar’s Fund Manager of the Year: KiwiSaver. This is in addition to it’s #1 ranking from Consumer NZ in its People's Choice Awards, and the 2019 and 2020 Awards from Canstar for Most Satisfied Customers.

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