ASB Bank is "going against the tide", launching a low priced home loan called Economiser.
The variable rate offered with the Economiser is 7.10 per cent, level with some of the lowest non-bank lending rates and 50 percentage points below ASB Bank's own standard variable loan rate of 7.60 per cent.
To achieve the keener pricing, Economiser is less flexible than the bank's standard variable loan (for example, you can't have loan holidays or split loans), has a set one per cent approval fee, compulsory insurance with ASB Bank (borrower's protection or term life) and attracts a $10 monthly account charge.
Barbara Chapman, General Manager Marketing and Human Resources, says the bank developed Economiserto take a competitive position in the market, especially given increasing competition from lower-priced mortgage providers.
"We believe there are ways of pricing a variable rate home loan that are different to what's being done today. We decided that a point of difference does exist in the market and that people are quite price conscious."
While other lenders are offering special deals and rewards with their home loans, and rates generally are on the rise, "we're going against the tide."
Chapman says that similar products are already available to Australian borrowers (the bank's parent, Commonwealth Bank, is among those to offer a cut price loan package).
While the rate for Economiseris currently 50 percentage points below ASB Bank's normal variable rate, Chapman says that spread isn't guaranteed. "However, it's always going to be below."
The bank calculates that Economiser would currently save $60.81 per month (on a $200,000 loan over 20 years) over its standard variable rate and $104.05 per month over its one year fixed rate.
