3 Year Fixed Home Loan at 3.95% HSBC, Comparison Rate Is 5.11%

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• 

  pichka on 25/04/2015 - 11:41

  this is not a deal

  I just refinanced with CUA fresh rate home loan….4.43% (4.45% CR)….has offset and redraw as well….IMB has 4.42%

  look at canstar and see

  • 

    raging on 25/04/2015 - 11:48

    +1

    Perhaps the fixed component is a deal. Mebank had 3.99%,this just might have the edge on that deal. Anyone else care to comment?

• 

  AnthonyM on 25/04/2015 - 12:00

  +5

  This comparison rate (5.11%) is terrible! Additionally, the HSBC webpage about it is very unclear on fees and other important information.

  For example, it states the CR is based on a loan of $150,000. The only HSBC charges we're told of are the 3.95% interest rate, the 5.11% comparison fee, and the $35/month premier fee. Let's look at the maths for their own example.

  $150,000 × 3.95% = $5,925
  $150,000 × 5.11% = $7,665
  Difference between IR and CR = $1,740 from fees
  Annual Premier service fee = 12 × $35 = $420
  Unaccounted fees = $1,740 - $420 = $1,320

  So HSBC has hidden $1,320 in fees on a $150,000 loan?!

  It sounds distinctly like they have blown out a whole stack of fees that they're not disclosing in order to create a superficially market-leading interest rate. In the end, I suspect applicants will end up paying well above the best rates you can get.

  I'm not prepared to downvote this deal because I can't understand what those fees are, but I think HSBC is being very untransparent, and for a mortgage that is a big worry.

  I'd suggest looking at, e.g., loans.com.au, Bankmecu, ME Bank.

  • 

    Steptoe on 25/04/2015 - 13:06

    +2

    You need do read up on what Comparison Rate actually means.

    The CR is based on a 3 year fixed component on a 25 year loan term. i.e. 22 years on variable at whatever their rate is.

  • 

    BluBoy on 25/04/2015 - 13:36

    +2

    The CR's these days are just about useless.
    As you say, they are based on a $150k loan (I'd love one of those please!), over a 25 year period (Yes it is an option, but it's never advertised, and people are better off taking the 30 year, even if they have the intention to pay it off quicker).

    However, where it becomes tricky with this, is they fixed portion is only for 3 years, after which (according to the CR formula requirements), it will then be based on 22 years of variable rates.
    And where @pichka (and any reputable broker really) will say that a good variable is currently around 4.2% to 4.5%, once you have finished off the fixed portion of the loan, HSBC expect you to go on to their standard variable rate (well, they don't actually say that, because that might actually be a good thing to know… But's it the usual thing to do). So the next question… What is their standard variable rate? 5.70%… That is not a typo, FIVE POINT SEVEN MOTHER-LOVING PERCENTS. The whole country gets excited when the RBA drops rates by 0.25%, Having your standard variable 150 basis points above the 'good' rate is robbery.

    Of course, no sane person does that. At best, they go with HSBC for the 3 fixed years, then transfer the loan ASAP to the next best lender at that point in the future. HSBC are hoping for the dumb and lazy people to not bother.

    So then the question becomes, is this a worthwhile loan FOR THREE YEARS.
    The first google result, shows the average homeloan is ~ $500,000.
    At 3.95% fixed rate, that is approx $1646 per month ($19,750pa).
    HSBC have ~ $1k of hidden loan establishment fees
    And of course the I-cant-believe-Foxtel-is-cheaper' Premier monthly fee of $35 ( $420pa).
    Total cost for three years comes to ~ $61,510

    Quick comparison to Something like the MeBank offer:
    At 3.99% fixed rate, that is $1663 per month (or $19,950pa)
    $0 Application fees
    It can be had for $0 per month, or if you want some of the extra features, $395pa
    (And I just want to point out that the standard variable rate after the fixed period is 5.13% - Not a bargain, but it isn't taking multiple limbs)
    Total cost for three years comes to ~ $59,850 to $61,035

    I'm not here to tell you what to do. I have no background in finance at all. I have even simplified a few of the equations to keep things a bit easier to read…
    BUT PLEASE… Do your research. For me, I would not be going HSBC based on past experiences.
    Plus despite having the cheapest interest rate, I believe this offer is beaten by MeBanks 3.99% product, even with the added cost of the optional full featured loan add-ons.

    Finally, just to really get you leander jumpers thinking… It would take one interest rate drop to get some variable rate products under 3.95%. Image if there was a second as well (or third, fourth…)
    Even if there is just the one drop, how long till rates go back up? Could it be close to 3 years? Is betting against the bank like this worth the exit fees associated with fixed rates? Is your situation stable enough that you can say you wont be moving, or selling, or needing to refinance within the next 3 years? Breaking a fixed loan period will cost you thousands of dollars. Breaking a variable may have a few hundred in legitimate fees. What about offset, redraw, additional payments? Based on your situation, would any of these features benefit you?

    TL;DR - Some random on the internet does not think this is the best 3 year fixed rate loan available.

    • 

      clubhonda on 25/04/2015 - 16:07

      All fixed term fixed rates resets to a variable rate when it expires. When it does just negotiate for another fixed or variable rate discount, not rocket science.. This is a Premier offering, for those who are not used to private banking, it means you get a dedicated relationship manager who will advise you before it matures. I personally use an RM at their Camberwell branch and he's always been great in providing a good rate and service.

• 

  SuiCid3 on 25/04/2015 - 12:03

  +3

  The rate itself is great.
  Whether or not the whole package is a good deal will need to be looked into further.

  • 

    gimli on 25/04/2015 - 13:26

    +1

    The rate is great mate but is it bate that you will hate at a late date