Under Fundit's scheme, home owners put up online auctions detailing their loan needs, and lenders compete with each other for the business by making bids. Prospective borrowers can then accept the most competitive lender's bid.
The auctions are free to list for borrowers. Borrower and lender details remain anonymous until the auction has been won, to ensure that lenders compete on a level playing field regardless of brand strength. Fundit claims that its online auctions will improve transparency in the mortgage market and lead to greater competition among Kiwi lenders.
Two of the major New Zealand banks, BNZ and Kiwibank, have pledged to submit bids on Fundit auctions, with a further six smaller lenders committed to supporting the site. Initial customer response has been cautiously positive, with a number of prospective mortgagors listing their home loans on the site within the first few days of launch.
However, although the online channel has become more popular for financial services in recent years, many customers are still hesitant to use the internet when applying for high-value long-term commitments such as mortgages. The internet is commonly used to research mortgages, but the actual application is most often done offline.
It is likely to take several years for these attitudes to change, and this will pose a significant hurdle for Fundit's success. Moreover, the quality of loan applications submitted through the website is yet to be determined, and some lenders may not appreciate competing mainly on price and not using their brand strength. Nevertheless, should the new website prove to be popular, it has the potential to revolutionize the Kiwi mortgage market. 'End Intelliext
Sign up to our weekly newsletters for the latest industry news & comment.