Banks go to war over rates

Two banks competing for home buyers have started a rare public spat over who has the best rates.

ASB-owned BankDirect fired the opening salvo in a full-page newspaper advertisement criticising BNZ's "Unbeatable" 7.6 per cent mortgage rates campaign and pointing out its own 7.5 per cent rates.

"The Unbeatable home loan offer is out of order," BankDirect's ads read.

BNZ fought back, borrowing ASB's Ira Goldstein for ads comparing ASB's interest rates with its own over the past year.

The ad was addressed to ASB saying: "Goldstein, find out why Bank of New Zealand is still unbeatable."

BNZ and ASB were also the prime contenders in the home mortgage battle when BNZ ran the same campaign late last year and started a price war that hit all the banks hard.

The Unbeatable campaign promises BNZ will offer lower two-year fixed term interest rates than its four main competitors - National/ANZ, ASB (excluding BankDirect), and Westpac. Between them, the banks hold about 85 per cent of the mortgage market.

Advertising agency Lowe NZ chief executive Stephen Pearson said while other industries, such as car manufacturers, took out advertising comparing themselves with competitors, it was rare in banking.

"There is a considerable body of evidence to show the person who promotes the slagging ends up with no great gain. In the end great brands are built on emotion rather than left-brain logic."

BankDirect head Jim Anderson said it was the first time his bank had directly hit out at the competition.

He was disappointed BNZ hit back at ASB, rather than BankDirect.

"To me that was bit weak."

"We felt it was necessary our customers and the public were aware that there was more to it than what was being said. The key message was that our bank means those rates are business as usual, and the other was a limited time offer.

"If someone investigates the rates there were definitely other options. We just felt BNZ's was not 'unbeatable' because there are too many conditions and exceptions attached."

BNZ spokesman Zaman Toleafoa said BankDirect's opening salvo "was quite unusual, that's for sure".

"It's not often you see this type of advertising in the banking industry. It's not in our best interests to slag each other off, but that ad was particularly damning.

"We didn't like its content or style and that is why we responded to it."

BNZ head of communications Peter Douglas Bell said ASB was using its subsidiary BankDirect to undermine BNZ's campaign by confusing customers. He said it had questioned BNZ's honesty, so BNZ felt it was important to answer back.

He said comparing BankDirect's lower interest rates to BNZ's offer and services was "akin to comparing a luxury car to a motor scooter" and said the advertising was "underhand".

Massey University banking lecturer David Tripe said shopping around was still more advisable than taking advertised rates at face value.

"What I suspect [the other banks] are doing is that if one of their customers comes to them and says 'BNZ is offering me this', I would not be surprised if they matched it."

Who offers what

Two-year fixed-term rates only

BNZ 7.6 per cent

ASB 7.8 per cent

National & ANZ 7.8 per cent
Westpac 7.8 per cent
BankDirect 7.5 per cent
TSB 7.7 per cent
Kiwibank 7.5 per cent
Superbank 7.75 per cent
* Top four banks are the ones BNZ's Unbeatable campaign promises to beat.