Banks using holiday deals to snare home loan customers

LUXURIOUS holiday destinations including Paris and New York are the latest bait being used by banks to lure in new mortgage customers.

Bank trick: holiday with your mortgage?

LUXURIOUS holiday destinations including Paris and New York are the latest bait being used to lure in new mortgage customers.

Hopeful homeowners stretched to the limit are the banks’ latest target — one of the nation’s biggest banks is using a new deal that gives customers a dream holiday with their home loan if they sign up.

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But the deal has been criticised by financial experts — they warn customers shouldn’t be enticed by these offers when signing up to one of the biggest financial commitments in their life.

The deal rolled out by National Australia Bank is being targeted strictly at owner-occupiers, and could ignite competition among financial institutions all desperate to snare a bigger slice of the market share.

Financial comparison website iSelect’s spokeswoman Laura Crowden said customers should instead look at the bigger picture when locking themselves into a long-term mortgage deal.

“We always encourage consumers to carefully review the fine print of home loan special offers or incentives to ensure that the advertised loan will meet their needs over the longer term by providing a competitive interest rate and competitive ongoing fees,’’ she said.

iSelect figures show on a $300,000, 30-year home loan, the average standard variable rate is 4.55 per cent and monthly repayments are $1528.

The average rate on a three-year fixed loan is 4.38 per cent and the monthly repayments are $1498.

But NAB executive general manager Angus Gilfillan said the deal was designed to make sure borrowers weren’t restricted to just buying a home and not enjoying themselves by going on holiday.

“We didn’t want their life to stop just because they’ve taken out a home loan, that’s where this offer of 250,000 Velocity points comes in,’’ he said.

“That’s enough for two people to fly to New York or London and back, or two adults and two children to Fiji and back.’’

Consumer watchdog Choice’s spokesman Tom Godfrey warned the “last thing” customers should be thinking about when signing a home loan offer is Frequent Flyer or rewards points.

Instead they should be focusing on whether they can meet the home loan repayments.

The deal is available to NAB customers who borrow an additional $250,000 on their already existing home loan or to new customers who must borrow a minimum of $250,000.

Customers must also have a NAB Velocity credit card and an active transaction account with the bank.

The offer begins from Monday.

@sophieelsworth