Competition between financial institutions has them offering attractive incentives to prospective new home loan customers.
A platter of incentives including cash back offers up to $2000, fee wavering, frequent flyer points and limited rate discounts are among the latest tactics used by banks to draw in new home loan consumers.
New analysis by comparison website Mozo found in the last six months the number of bonuses available with new home loans has doubled — there are now 20 deals available on the market.
Mozo spokeswoman Kirsty Lamont said the influx of sweeteners onto the market signifies the intense home loan competition.
“Rates are at a standstill and already at record lows so lenders are really being forced to come to the table with lucrative offers for new customers to stimulate switching interest,’’ she said.
“Many lenders aren’t really willing to cut their rates further and so they are trying to create interest with other upfront offers and sweeteners.’’
Ms Lamont said home loan switching was often spiked through cash rate movements but the
Reserve Bank of Australia hasn’t budged in six months leaving lenders to generate market interest using other tactics.
The cash rate has sat at 2.5 per cent since August.
Interest rates remain at historical lows — the average standard variable rate is 5.5 per cent compared to 5.45 per cent 12 months ago.
The average three-year fixed rate is 5.5 per cent compared to 6.03 per cent in February last year.
Ms Lamont said all of the big four banks had home loan sweeteners on offer which was “unusual for them to offer such lucrative deals for new customers.”
Loan Market director Mark De Martino said banks have had to adopt different approaches to getting new customers through the door other than just focusing on offering low rate deals.
“Lenders and banks who regularly compete with one another on rates have had to look outside their normal battle grounds in order to attract new customers because of the rate stability over the past year,’’ he said.
“For refinances the biggest sweeteners for switching lenders has been in the form of cash rebates or gifts.
“With banking exit fee’s abolished some customers can get some quick cash in their pockets by switching from one lender to another.’’
Australian Finance Group’s general manager of sales Mark Hewitt said the mortgage market had never been as competitive as now.
“There’s only so many leavers lenders can pull when you think about it,’’ he said.
“You’ve got interest rates, fees, product features and the service they provide to the customer, lenders are all keen to compete for market share.”
Original article published at www.news.com.au by Sophie Elsworth at News Limited Network 23/2/14