Competition is coming for Heartland's online mortgages

Heartland Bank's online mortgage product could soon be facing greater competition as early as May next year when the four major banks have to be ready for open banking.

The latest information Heartland provided to the market its online home loan receivables increased by 19.9%, or $27.6 million, to $302.3 million in the six months ended December.

Heartland relaunched the product in October 2020 after the arrival of covid put the kybosh on its earlier effort in March.

While it will lend only to owner-occupiers with a deposit or equity of at least 20% who are refinancing or purchasing a stand-alone house on a single section in a major New Zealand centre, Heartland promises decisions on applications “within minutes.”

In Australia, Westpac's parent bank launched a new direct-to-bank digital mortgage product in April and is promising unconditional approval of applications within 10 minutes by using open banking protocols to verify an applicant's income.

It told the Australian Financial Review that it had lent A$80 million in its first month.

But Heartland Bank chief executive Leanne Lazarus says her bank will welcome any increased competition.

“Heartland is supportive of open banking as it aligns with our digital strategy and commitment to reducing customer friction in the products and services we offer”.

“We welcome any increased competition that may come from the introduction of open banking and wider adoption of digital services and automation in banking,” she says.

Lazarus says Heartland is pleased with the growth it has achieved wit the online mortgage product and that its low-cost origination platform has enabled it to consistently offer market-leading or competitive rates.

“However, as a smaller bank, we operate in a very targeted part of the residential mortgage market with stricter eligibility criteria than the major banks,” she says.

Payments NZ is providing “the pipes” for open banking and is in the process of developing application processing interfaces, or APIs, and will ensure the four major banks with be alligned with the same version of the standards by May next year with the government-owned Kiwibank to follow in 2026.

Lazarus was coy about when Heartland would be ready to join the open banking system. “Heartland is currently considering its approach for implementation and timing” but it isn't concerned about the cost of compliance.

“This is, after all, in place to improve convenience and choice, and therefore support good outcomes for New Zealanders.”

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