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Tuesday, 6 November 2018

Home Loan Gymnastics - How Bendy Is Your Bank?

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Which home loan providers are willing
to reduce the weight of the ball and
chain?
A few weeks back I wrote a blog post on how I managed to score R83k by sending a simple email to my bank requesting an interest rate reduction on our home loan. As expected, many of the blog's readers, being the money savvy type and not shy to hack their way to a reduced interest bill, got in on the action and contacted their home loan providers with the same request.

These reader's requests were met with varying degrees of eagerness by the banks, ranging from the banking talk equivalent of “we so glad you asked, here’s some free money ” to “kindly f-off!”

Many of the readers were kind enough to share their experiences (I wouldn’t expect anything less from the awesome South Africa personal finance community) of their rate reduction requests, which was great, because it allowed me to pick up some trends.

The first thing I noticed was that a home loan provider’s willingness to adjust a home loan rate seemed to have less to do with the current interest rate, repayment status or amount of pretty pleases in the request, and more to do with their own internal policies. It seemed that some banks were more flexible in their approach to adjusting home loan interest rates than others.

So I decided to collect all the feedback I received via the comments on the previous article, through email and on Twitter, and score each home loan provider's flexibility accordingly. Interest rate flexibility is certainly something to consider if you end up being offered a home loan from two different providers. In fact it may even make sense to take a slightly higher rate from a provider that you know would be likely to reduce your rate going forward than from one which offers a better rate with 0 chance of a future reduction. Small interest rate reductions along the way, could end up putting hundreds of thousands of Rands in your pocket.

Before I move on to how each of the banks scores, I need to mentions a few disclaimers:
- This is a highly subjective article based on a small set of purely anecdotal evidence. No scientists, data analysts or Bankers were involved in the scoring and rating of the various home loan providers.
- The success or failure of a rate reduction application will no doubt also depend on many other factors and not just who you bank with. Things like your repayment history, credit score, current economic environment etc. will not doubt play a role as well.
- Bank policies and rules could well change going forward, so nothing is set in stone and this article is just the way I interpret the current landscape.

Okay, I hope those disclaimers are enough of a shark net to keep any lawyers off my beach! Onto the good stuff! I present the banks in order of most flexible to least…

1. FNB

Flexibility Rating –Yoga Instructor (super bendy!)

I think I figured out what the abbreviation FNB stands for – Flexible, Negotiable, Bendy!

Based on the feedback I got from readers, I am very impressed with FNB. And of course since my bond is with FNB, I can vouch for them personally - the success of my interest rate reduction request was the reason for the original blog post I wrote. It was really great to see that FNB  came to the party for many of the blog's readers as well!

Even though not all requests ended in a favourable outcome (in the example below, most likely due to the fact that the reader’s rate was already super ridiculously low) FNB was willing to evaluate each request.

The evidence:

“...I tried it and it worked, within 2 days my bond interest rate got reduced...”

“…I did the same last month and got a 1% reduction from 11.5% to 10.5% with the second option of capitalizing what I had paid extra. My bond is now 1k cheaper… “

“…Gave this a shot with FNB, no go. I am currently 1.05% under prime, 5 years into a homeloan. “Kindly be advised that a rate review assessment has been performed on this application and based on the current pricing strategy and current market conditions we are unable further improve on the rate. The rate of Prime-1.05%(8.95%) is at best.”…”



2. ABSA

Flexibility Rating – Out of Practice Gymnast (flexible but may need some encouragement.)

ABSA were willing to investigate rate reduction requests however, unlike FNB, it seemed that you may need to do a little leg work sometimes (and that's why ABSA are not tied for first place with FNB). If a trip to the branch is required, keep it mind it is a small price to pay for the big saving a successful outcome will give you.

The evidence:

“…I'm trying this with ABSA, can't send an email though, you have to go into a branch. They fill in a form and you have to provide motivation for a decrease. Did it this morning, will post as soon as I get feedback... Finally got a response, not sure what the hold up was. My initial rate was prime+1.56 (11.56%), got it down to prime+0.25(10.25%). Was asked if I wanted to accept the rate or send it back, decided not to risk it and accepted. Will contact them again in a few months and try to get less than prime. Thanks Stealthy!...”

“…Thanks Stealthy! One year into my bond with Absa, and they accepted the reduction request. 9.7% down to 9.5%. Calendar marked to go into the bank again in a years time…”

“…I went through the same process about a month ago, rate was dropped by 1% total…”.



3. Nedbank

Flexibility Rating - Retired Gymnast (if you really really twist their arm, they may just do one last performance.)

It seemed that with enough begging and pleading and if the moon was just right, it was possible to get Nedbank to have a look-see at your current interest rate. I have a feeling that their quota of niceness has been used up by the blog's readers who already requested a reduction (as per the comments below). So you may have a little bit of a tough time getting someone at Nedbank to to entertain your request, and a tougher time prying out any additional percentage savings. But still definitely worth asking the question!

The evidence:

“…So after emailing the contact centre with no response, I eventually turned to twitter, and some one from the home load department called me. They (Nedbank BTW) said they do not normally negotiate home loan rates after the contract is signed, but she would forward my request on to senior management to investigate. She said it would take 2 to 3 working days, so I await their response and will let you know the outcome…Sadly it’s taken Nedbank two weeks to decline. Ah well, nothing ventured nothing gained…. “

“ …Nedbank got back to me, and to my pleasant surprise, they approved an interest rate change from prime + 0.25% to prime (so a saving of 0.25%). They did note that this was approved by exception, so you will have to send them a message and hope for the best!... “



4. Standard Bank

Flexibility Rating – Titanium I-Beam (rigid enough to hold up a skyscraper.)

Based on the feedback, Standard Bank takes the stance that a person agrees to a rate at the time of taking out the home loan, and that’s that. End of story. I guess that’s their prerogative (although I am sure it will come back to haunt them if you are reading this and in the market for a home loan in the near future...)

If you do decide to take a home loan with Standard Bank, make sure that you get the best rate you possibly can (which you should be doing anyways) because it looks like it is carved in stone after you sign on the dotted line.

The evidence:

“I just called Standard Bank. Our home loan is 3 years old and way ahead of schedule. I also moved all of my other accounts there. I was simply told, "No, you signed a contract for a certain interest rate and that's that. We will not change it." I am so bleak right now.”

“Had the same reply from Standard Bank. Jammer koebaai Meneer!”

“Had the same response from Standard Bank. Will try emailing anyway.”

“I tried with Standard Bank.... Standard answer - "Unfortunately, we do not re-price home loans post registration. All rate negotiations have to be done at grant stage" :( “
 


In Summary

Okay let me put all of the above into a neat little table. Here are the Big 4 Banks ranked from the most flexible to the least flexible.


The Rest

I was hesitant to mention the following two providers, based on the fact that I only got one piece of anecdotal evidence for each. But instead of omitting them completely, I thought I would leave them out of the main competition and just drop the comments I received on them below - you know just for interest sake.

I won’t be drawing any conclusions based on only one person’s feedback…

Investec

“…Looks like I've now saved R300 a month with prime less 1% now after a additional 0.25% reduction… “


SA Home Loans

“…Got this response from SA Homeloans – “Unfortunately, SA Home Loans does not conduct individual rate reviews.”…”






Till next time, Stay Stealthy!
 - ~ - ~