If you read about mortgages in the news, then the most topic home loan related topic is definitely interest rates. Sure, we also want to read about different methods of repayment or whether or not we can pay off the loan early, but when it comes down to it, the most popular mortgage stories are clearly centered on interest rate issues.
And apparently we are also interested most heavily in interest rates when we take out our home loans, too. That’s what NAB thought, anyway, and their recent increase in market share seems to confirm that by far the major decision point for prospective mortgage holders is the interest rate.
NAB decided late last year to choose a policy of setting their home loan variable interest rates at a level “significantly below” the other major banks – significant enough that the difference in rate would become a deciding factor for customers choosing between banks. It seems that this strategy has been successful, because although NAB is still only the third largest lender amongst the big four banks, the number of mortgages it is starting up has been increasing at a massive rate. One statistic is that the market share of NAB has risen by 14 per cent over the past three months, a time during which the market share of CBA and Westpac have both fallen.
So are we only interested in the interest rates? NAB’s experience might be surprising, because not only have they managed to attract a whole lot more customers by keeping their rates noticeably lower, but they say they also attracting what they refer to as a “higher quality customer portfolio”. So it’s not just first home buyers pining for the cheapest possible deal who are running to NAB. Does this mean other banks should start dropping their interest rates? I’d like to think it does, but I’m not holding my breath.