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Minor Party Kingmaker

A lot has been heard about the Maori Party as potential swing party - they are the only party that however grudgingly has kind of said it go go both ways. The Greens, on the other hand, have said they would not form a government with National. But they have not automatically said that they could do a deal with Labour. David Farrar has identified that between these two positions there are a couple of important, unanswered questions. As an aside, this illustrates why we needed to have a better critique of the minor parties by the media - but never mind, thank goodness for bloggers. Link.


Its about information - not aggregation - in mortgage broking

In the mortgage broking world a paradigm is dying - aggregation. This model, just as it is flowering in the life industry - is struggling through its final years in mortgage. Some aggregators also contain the seed of their future survival though: information handling. To connect this to some real-world evidence of change I need to tell you a story:

In a recent hearing at a disputes tribunal a mortgage broker was asked critically about how many lenders he had approached with a deal before going to a sub-prime lender. The point at stake was - had he simply placed it where he could get the most commission?

At a business development meeting in the last week a lender talked about paying higher commissions to brokers that got a much higher proportion of their deals through.

These forces - the prudent expectations of clients and the law as to what a broker should do and the plans and desires of lenders as to what they would like them to do are directly at odds.

Except, when a good bit of information management software is available. You see the broker was able to show the judge that he had considered many loans in the market by use of loan comparison software.

This may explain why a technology firm is buying a UK-based loan packager. Loans are information intensive things - just look at a mortgage brokers filing cabinet. Systems, and the internet, are great ways to manage information. The revolution will not look exactly like what happened to share-trading - but it will have many of the same features. The lenders can join in too... they want to run systems with straight through processing. Now all we have to do is get valuers and lawyers to learn how to use computers and we'll really be away!


Dealer Terms

We are now seeking to enhance our standard commission comparison by adding a sample of dealer group terms to the comparison - as experienced by member advisers. If you are an adviser and would like to help construct this part of our comparison then do drop me a line and hopefully we'll be able to help each other.


When everyone is being pushed back...

... how do you tell how well you are doing relative to the competition? Take three cases.

An insurer has some  problems with it's parent company. A capital injection follows. It's probably much safer today than it was the day before the move - yet it may receive less business than it was immediately prior to these events.

Take a fund manager that has had to suspend withdrawals from a fund - and there are several to choose from - perhaps they have made a good effort at the communication process. They won't be deluged with new funds inflow into those products of course, but they might still expect their share of, say, new KiwiSaver business to be unaffected.

Take a bank that has maintained a reasonably conservative approach to it's lending. Because the rest of the market has shifted to become much more conservative than them they have now received a spike in loan market share. Perhaps they feel that this is out of balance - and now they have shifted to move their lending criteria back into line.

Aren't they an interesting contrast? These are interesting times indeed when reputation, new business growth, pricing and policy create such varied outcomes.


Pay Attention ... there will be changes!

In a delightfully frank admission of the rapid changes that are affecting the deposit guarantee scheme the Reserve Bank asks readers of it's website to make sure they "press F5" to ensure that they are reading the up to date Q&A.

Disclaimer: The information posted as Question and Answers is provided for general guidance only and cannot be relied on as definitive. In particular please note that the final terms of the Deed will prevail to govern any guarantee arrangement. The information posted as Questions and Answers is subject to ongoing clarification, addition and amendment.
Please press F5 to refresh this page, to ensure you are viewing the most up-to-date information. This page is updated regularly.


My added emphasis. Link.


Interest Rate Strategy

There is a curious divergence in interest rate strategy right now, best to outline it by showing you the following table:

ASB Bank

KiwiBank

Term

 

10.25%

 

8.70%

 

Floating

 

 

7.99%

 

8.29%

 

Fixed 6 Months

 

 

8.10%

 

8.19%

 

Fixed 12 Months

 

8.10%

 

7.99%

 

Fixed 24 Months

 

 

8.30%

 

8.35%

 

Fixed 36 Months

 

 

8.75%

 

8.60%

 

Fixed 60 Months

 


Did you spot the massive difference between the floating rates? Is this a marketing decision or some quirk of funding arrangements...


Reputational Risk

John Gapper of the Financial Times writes about reputational risk - and in so doing explains why I don't get paid $500,000  a year to write a blog. Link.

In all fairness though it is one of the curses of public ownership that to someone every expense looks excessive. It's the same thing with MPs salaries and the salaries and perks of those holding senior jobs in the civil service or state owned enterprises here in New Zealand. It is less common that these issues are criticised so much in private companies - so the Directors of Contact Energy can count themselves as unfortunate in being singled out more recently.

Incidentially, I was asked by a client yesterday (in jest) about whether a piece of work would be free - he was obviously impressed with it - and this blog folks, is pretty much the free thing.


CBA Hails Liquidity

Asian Banker reports how CBA hails liquidity, and then celebrates it's leeway with an acquisition - BankWest.

“Right now it’s the most important risk that we are managing,” Alden Toevs, chief risk officer at Commonwealth Bank of Australia (CBA), the nation’s largest mortgage provider, said in an interview earlier this month. “We are seeing people will have opportunities or not, based upon whether they have liquidity, regardless how much capital they have. They can survive on liquidity even if they have no capital, for at least some time.”

The banks in the region that rely heavily on retail deposits are in better positions than the net borrowers in the interbank market. Toevs says: “We are not counting on any reliance on that market, because the market has on a day-by-day basis gotten very difficult. So we are trying to maintain the ability not to have to access the market for many months at a time.” CBA is 58% funded by retail deposits, and BankWest, which CBA agreed to acquire from HBOS for A$2.1 billion ($1.5 billion), has a higher share at 63%.

Here in New Zealand CBA's subsidiary, ASB, has released a new set of lending rules that are considerably more restrictive. With loans easier to buy than originate, no one needs easy lending criteria, or high commissions for mortgage brokers. They'd better learn how to sell insurance.