In the latest survey by Good Returns, Auckland-based Southern Cross, the second largest building society in New Zealand, has the cheapest fixed rates over one, two and three years.
The rates were set a few months ago says general manager Ken Ockenden and are not part of an aggressive new pricing policy. Southern Cross’s strategy is to offer attractive rates to low risk borrowers.
The society usually requires a deposit of at least 20% and borrowers’ finances are vetted to ensure that total debt repayments, including the mortgage, do not swallow more than 35% of after-tax income.
Lending staff inspect all properties put forward for mortgages and borrowers are interviewed in person.
A typical customer will be aged 40-plus. Ockenden explains: “The reality is that they would be towards the top of the market.”
“We’re not aiming for volume business. What we want is good business.”
Southern Cross, founded in 1923 and operating mainly in the upper half of the North Island, deals directly with borrowers, rather than marketing through brokers. “There is no commission being moved into the cost structure,” explains Ockenden.
He believes that the traditional building society business model, based on a mutual structure where most loan funding comes from savers’ deposits, is proving to be resilient.
Some competitors, he says, will bargain over rates and certain borrowers may be able to obtain better deals than those advertised. But Southern Cross likes to keep its marketing simple and advertised rates are not negotiable “It is a very simple model that we operate and that has a lot of advantages.”
Southern Cross’s loan book stands at about $360 million. Ockenden says its share of the market is small compared with the major banks.
