Finally the spring offers banks usually make are now happening as the traditional house hunting season gets into full swing.

Last week ASB and Sovereign came out with a two-pronged offer that included a Galaxy Tablet as an inducement to come on board and perhaps more importantly, as an inducement to stay. Looks to me like they’re as keen as the others to attract new business but trying to do something about it disappearing straight out the back door.

As far as the offer being an inducement to stay is concerned the deal is you get the tablet if you take a fixed rate of 3 or more years in duration and fix at least $100k. The trick is that you have to take the advertised rate, you can’t get a discount AND a tablet.

Will it work as a retention tool? I don’t think so, at least not as well as they’d like.

Certainly the feedback I’ve been getting from my own clients is that the rate is more important with one describing the tablet offer itself as “a gimmick”. The reality is that people are pretty savvy and with an offer like this you have to wonder if ASB have underestimated their own customers.

Let’s put some rough numbers on it:

Assume a mortgage of $400,000 at the advertised 3 year fixed rate of 5.90%. The interest cost on that is $23,600 each year. The same loan without the gadget but with a discount to say 5.65% gives $22,600 in interest a year. It doesn’t take a rocket scientist to see the difference in the first year is more than the retail price of the gadget at Noel Leeming! The saying ‘there’s no such thing as a free lunch’ seems to ring true here!

As I said above, most of the people I’ve spoken to last week can see better value in arguing for a discount and have instructed me to enquire on that basis. I bet there will be others who love the idea of a tablet in exchange for fixing but the reality of many households out there is this — yes a gadget would be nice but they’re more interested in the effect on their wallets.

 

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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