One of New Zealand’s smaller banks is offering a home loan rate so low that it’s only telling mortgage brokers about it.
SBS Bank is undercutting competitors with a six-month rate of 5.99% – almost one percentage point lower than the six-month rates publicly offered by the major banks.
SBS has asked mortgage advisers around the country to identify customers who meet its criteria for the rate. The brokers OneRoof talked to believe SBS has kept the deal out of the public eye to avoid being swamped with applications.
Tella financial adviser Ben Goldsmith told OneRoof that special broker deals weren’t unusual but this was the biggest drop he had seen for some time.
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“It’s just like a marketing thing that some of them do and it works quite well. For example maybe the brokers had forgotten about them and hadn’t sent any deals through so they are like, ‘Hey, let’s do something to get the brokers back onboard’.”
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Mortgage-holders looking to take advantage of the special rate need at least 20% equity in their home. Goldsmith said the deal was not available to existing SBS customers and was unlikely to be of use to first-home buyers, who are already being offered a one-year rate of 5.59% by the bank.
He noted that the deal could end up offending existing SBS customers, who may feel that their loyalty should be rewarded.
He said the lowest six-month rate being offered by the main banks was 6.75%. “They are all open for business and they all want to negotiate, but apart from the SBS offer, they will do their best to match the other banks and make sure they do not lose business.”
Loan Market mortgage adviser Dave Williams said SBS was, in effect, asking the adviser network to do some of its work and find good home loan applications. In return, it would provide those customers with heavily discounted rates.
Tella financial adviser Ben Goldsmith said banks undercutting competitors' home loan rates was an effective marketing tool to get new customers. Photo / Supplied
The major banks have been cutting rates hard and fast since the start of August. Photo / Ted Baghurst
“We’ve been given instructions it has to be a clean deal, so we are not going to waste their time with 'we need a policy exception here and a policy exception there’. They want us to triage it before we send it in.”
For example, anyone who has just started a new job or who does not have enough equity will be rejected.
SBS Bank only put the offer out to brokers in the last few weeks, but Williams expects others will follow.
EasyStreet Mortgages mortgage adviser Gareth Veale said 5.99% was a massive discount.
One of his clients, who was borrowing $2m, had been offered a six-month rate of 6.85% by their existing bank but 5.59% by a smaller bank “meant a $1400 difference per month in interest costs, which is a huge saving”. Even on $1m of borrowing, it was a monthly saving of $700, he said.
The new bank also beat the existing bank’s cashback offer – $20,000 v $4000.
EasyStreet Mortgages financial adviser Gareth Veale says 5.99% is a "massive discount" and will result in hundreds of dollars in savings for people. Photo / Supplied
Veale said there was a chance the deals on offer in six months might not be as attractive or as competitive, but it was a risk worth taking. “The gap in this particular deal is so great that you cannot take advantage of it,” he said.
Veale said it was also another reminder that people needed to shop around and negotiate rates through their broker or even directly with the bank because most were discounting the advertised rates.
“Banks are like power companies – they have no loyalty. When it comes down to it the most important thing you should do is chase interest rates.”
A SBS Bank spokesperson confirmed it was offering a special six-month fixed rate of 5.99% through its broker partners.
“This is a limited-time offer for new lending which, alongside our market-leading FirstHome Combo package (offering a one-year rate of 5.59%), reflects our commitment to our purpose of helping Kiwis find a place called home.”
The bank said it regularly reviewed its rates.
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