As the banking war continues to be fought with no fee and competitive interest rate offers being the ammunition of choice, the Commonwealth Bank has weighed in with a new home loan product in an attempt to entice customers away from the National Australia Bank.
According to a Smart Company report, this offensive was launched after the NAB launched a massive marketing campaign in February to prove to borrowers that they’re different to the other majors; abolishing exit fees on their loans and promising to pay exit fees for mortgage holders who switched from the CBA, ANZ and Westpac.
While the NAB have consistently boasted the lowest variable rate of 7.67% out of all the majors, the new CBA loan offers a 7.24% rate and does away with monthly, annual and exit fees and promises to negate payment fees, loan service fees and settlement charges.
Lobbing yet another grenade at the competitors, the CBA will also be loosening the reins on its current borrowing limit, which is set to increase from 90% to 95% for new customers with a strong credit history. Of course those taking up this offer will have to pay mortgage insurance, but the bank is confident it will lure new borrowers and increase demand for home loans.
According to executive general manager of retail products, this latest move by the CBA is intended to expand the bank’s home loan business in the wake of a reduction in borrowing after the first home owner’s grant boost reverted to the lesser payment and interest rate rises made potential home buyers wary.
“I think we and other lenders are pretty keen for more business at the moment,” he said.
Experts in the housing industry are hoping that as competition in the banking sector starts to once again heat up, we could see a flow on effect to the property market and construction sector which have both been sluggish over the past few months.
Housing Industry Association chief economist Harley Dale says, “Potentially this could have an impact. This talk of increased competition is occurring within an environment of steady interest rates, and there’s a broad expectation that rates will stay on hold.”
“If you have at least a reasonable period of time when rates are on hold, and you have greater competition, then that could provide a boost in confidence and activity for new home building.”
Dale says that such a potential positive impact will largely hinge on whether or not consumers feel the deals currently being offered by the banks are genuine, with the fees that are being abolished in some places not just being added on in others.
“There has been some skepticism out there about what people are actually losing and gaining when it comes to fees. But if you take the glass half-full approach, then what you’re seeing is a net reduction in mortgage costs. That could boost housing demand.”
If recent auction results are anything to go by, it would seem the market is remaining steady at present with clearance rates sitting at a reasonable but not exciting 65% for Sydney and 66% for Melbourne earlier this month.
The Melbourne result is down for the same time last year, when clearance levels were at 87%, but the Real Estate Institute’s chief Enzo Raimondo notes that the current environment is creating a bit more buyer caution.
“With a similar number of auctions the main difference is that last year interest rates were much lower as were overall prices, highlighting the impact of reduced affordability on the market.”
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