Superbank launched its home loans offer in mid-July with a key element being its built-in reward system for existing customers, progressively lowering the interest rate the longer the customer stays with it.
The rate on a $210,000 home loan taken out at 7.5% would decline to 6.9% (assuming no other changes in the market) over 20 years, saving the borrower $10,000 over the life of a 25-year loan, Superbank says.
Bank of New Zealand is currently surveying its customers on their views of various different loans with a range of rewards for loyalty including varying numbers of Flybuys or AirPoints for each $1,000 borrowed and varying levels of lump sum payments up to $500 for re-fixing their fixed rate loan when the term expires.
But the bank is also asking customers’ views on reducing interest rates for each year the loan is held of varying amounts up to 0.2 percentage points a year and up to maximum 0.6 percentage points.
The bank is also testing whether customers would regard such rewards as fair compensation for a higher interest rate or whether they would still want a lower interest rate.
Finally, BNZ asks customers to rank aspects of a loan that are most important to them among:
- Repay my mortgage faster
- Pay less interest over the length of my mortgage
- Receive a cash payment when setting up a home loan
- Have the flexibility to repay more off the loan when I can afford it
- Have a reduced interest rate.
After viewing BNZ’s questionaire, Superbank’s chief operating officer James Munro says it’s "obvious" that the questions were prompted by his bank’s home loan offer.
"Imitation is the ultimate form of flattery," Munro says.
Superbank spent months researching the market before finalising its home loan offer and the idea of discounts for loyalty "was an absolutely red hot driver, particularly for those with existing mortgages," he says.
"There’s this under-current out there that we detected that, once you’re in, the bank does very little to cement the relationship. We view it (the interest rate discount) as an absolute innovation in the market place."
BNZ has been in business for 143 years but is only now investigating the idea.
Should BNZ decide to follow suit, Munro hopes "that it’s customers will realise that they have Superbank to thank for it."
