“Home today, New York tomorrow”
That’s the home loan sign-up incentive announced by NAB on Saturday 19th September. The bank is offering eligible customers 250,000 Velocity Frequent Flyer Points when they take out a NAB home loan plus make NAB their main bank (with a credit card and transaction account).
NAB Executive General Manager Consumer Lending, Angus Gilfillan, said this was the largest Velocity Frequent Flyer Points offer from a major bank and delivered added value for home loan customers.
“It can take several years to save for a deposit, and for many Australians that means going without a lot of things, such as a holiday. The first year after taking out a home loan is often the hardest and people make a lot of sacrifices,” Mr Gilfillan said.
“We understand that life doesn’t end when you kick start the home buying process – which is why we’re giving customers this opportunity when they need it most.”
Velocity Frequent Flyer General Manager Commercial Jeroen van Son said: “With Velocity Frequent Flyer Points, you can fly to more than 600 destinations worldwide on Virgin Australia and Velocity’s partner airlines.
“This is the biggest Velocity Frequent Flyer points offer from a major bank in our history – whether you want to take your family to the Whitsundays, enjoy a romantic trip to the Cook Islands or send yourself Business Class to London and back*, Velocity Points give you the freedom to choose.”
Customers can apply between 21 September until 31 December 2015.
But is it a good home loan deal?
That all depends on the interest rate you negotiate with your lender!
Currently on the canstar.com.au database, the average standard variable home loan rate is 4.84 percent – but there are ongoing rates as low as 3.95 percent (lower if you choose a fixed rate or a basic product). On a 25 year, $500,000 home loan, the difference in monthly repayments between the average and 3.95 percent is $250 per month – so a $1,000 upfront bonus wouldn’t go far. Even return flights to New York, while attractive, will soon leave you behind the financial eight ball.
Forget about the lowest rate: even the difference between the average and, say, 4.34 percent (50 basis points lower) is $140 per month. Therefore it would only take 7 months to use up the “benefit” of $1,000 up front cashback – and not much longer to use up the benefit of free airfares.
See for yourself – try our Home Loan Comparison Calculator.
If you can get an upfront bonus plus the lowest rate you can negotiate then go for it – but don’t get dazzled by a marketing campaign if it’s ultimately going to cost you extra.
|Loan – $500,000 over 25 years||Interest rate||Monthly repayment||Interest rate||Monthly repayment||Monthly difference|
|Savings 1 year||$3,024|
|Savings 2 years||$6,048|
|Savings 3 years||$9,072|
Based on a $500,000 home loan over 25 years.
“Sign up” perks are an easy marketing tool for banks and something like a $1,000 cash back deal will grab the attention of borrowers. Certainly, with Australian’s love of frequent flyer rewards points – an amazing 88 credit cards on CANSTAR’s database offer a rewards program – this NAB promotion is sure to grab the attention of many borrowers. Keep in mind though that a home loan is likely the biggest debt that you’ll ever have and an upfront incentive thrown at you at the outset will mean nothing over the long term.
Mitchell Watson, Canstar’s Research Manager