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Simplicity beats banks, moves to a 2.5% floating rate for first home loans


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Nonprofit Simplicity announced today it has lowered its floating rate mortgage to 2.5%, setting a scorching new low in an increasingly competitive lending market.

Managing director Sam Stubbs said the reduction from 2.8% was a reflection of the low interest rate environment.

“Even in this environment, banks are still taking ordinary hard working Kiwis for a ride. We can do better than that, so that’s what we’re doing,” said Mr Stubbs.

“Our new floating rate is at least 1.5% lower than the banks, and the lowest rate anywhere. It saves someone with a $500,000 mortgage from $30-100 a week in interest, which adds up to thousands over the years. And another bonus, is we don’t punish Kiwis for early repayment. We want them to get out of debt as fast as possible, not tie them down for maximum financial as the banks currently do,” he said.

Simplicity’s first home loans are available to existing members only, who have been with the provider for one year and who qualify for a first home under the rules of KiwiSaver.

Simplicity launched its first home loan programme last October. It works through a ballot system. So far, more than 180 names have been drawn, with $30m of pre-approvals issued.

Prospective buyers have six months from the time of pre-approval to find their home. Simplicity lends up to 80% of the value of the property. Repayments must work out to be equal or less than 30% of after-tax income. Stubbs said the lending criteria was stricter than the banks because Simplicity was lending on KiwiSaver funds.

While borrowers were hugely advantaged by the lower rates, he said KiwiSaver members benefited too. The return to them was around 1.5 % better than they would otherwise receive if their KiwiSaver savings were in bank deposits. The loans form part of Simplicity’s fixed interest allocation across all its funds.

Simplicity’s first home loan is a first for KiwiSaver and marks several distinctive moves by the disruptor to make its mark on the industry.

As well as donating 15% of its fees to charity, Simplicity is determined to grow New Zealand startups. In 2019, it took an 11% stake in Icehouse Ventures, committing $100 million over three years to startups the likes of Sir John Kirwin’s Mentemia and Mint Innovation, a Kiwi company that recycles e-waste.