Happy Tuesday!
During the week just gone I had an experience with a lender that brought home the reason why banks and branches need to up their game. A client had to visit a branch to make some changes to an account that couldn’t be done on line. When the client established their home loan about 12 months ago they decided to use an old account of theirs as their offset, rather than establish a whole new account. They also did this after the loan was approved and not during the loan process. As they was making those changes they enquired with the branch manager about that status of that account being the offset. Only to then be told that, that account was an offset account BUT NOT attached to the clients home loan. It was only because the client needed to make a change to the account and the change was made in person at the branch, that the client realised. So for nearly a year that client had significant funds in their ‘offset’ that was an offset type account BUT NOT offsetting the interest. The clients were understandably upset that this was the case and it is now fixed. The lender certainly wouldn’t take the blame for it, as the client experienced in the branch. Only to be told by the branch manager, if you had have done your loan through the branch this wouldn’t have happened..
First Home Loan deposit scheme places all dried up last week, a new round of places will be made available in January. I have heard that some brokers have been able to get last minute places though that will be the exception and not the norm.
No real changes to rates this week. The biggest borrowing news came from CBA and NAB entering the buy now, pay later (BNBL) business. Which is kind of ironic as the banks haven’t liked clients having those facilities when it comes to loan applications. The products they are offering are slightly different to Zip and Afterpay because these are credit cards with 0% interest. Though very likely to cost a consumer more than using the Zip or Afterpay facilities. With Zip and Afterpay you’ve got a $1,500 limit, with the credit cards the limit is $3k. With Zip/Afterpay you get 8 weeks to repay the debt in 4 instalments. If you miss a payment then they hit you with $10. NAB’s card for example will charge you $10 If you have a balance of $1,000.
Mr Switzer broke this down in the best way I think ------> “Let’s assume two customers, Annie and Billy, are good at repaying their debts. They both buy a great suit for work that costs $1,000 on January 1 at the post-Christmas sales. Annie uses Afterpay. Billy is with NAB. If they both pay back within eight weeks, Annie pays nothing but Billy would pay $20 for taking two months to pay it off. If he could’ve paid it off under a month, he would’ve paid $10. If Billy took a year to pay it off, he would pay NAB $120 in fees (12 months at $10 a month). That’s like paying interest of 12%. It’s interesting that if he’d bought a $3,000 suit (the maximum you can borrow under the card) and took three years to pay it off, it works out at 8.8%. “
It’s all credit no matter which way you look at it. The new cards might appeal to Millennials, though they are still fraught with the same dangers albeit slightly less than traditional cards.
Have a smashing week out there.
JC
Scenarios and interest rates quoted above are suggestions and constitute general advice only.
Comments