Rate discount product gains traction

A South Australian mortgage manager has become the second group to partner with a new product that offers borrowers heavily discounted home loan rates.

Earlier this year, Loan Ave became a licensee of Loan Reducer – an online calculator designed to provide borrowers holding an owner-occupier loan and an investment loan with a lower home loan rate by leveraging the investment interest rate against the lender’s desired total return on funds.

Loan Ave has rebranded the white-label product to ‘Rapid Freedom’, and says customers could receive discounts of up to three per cent for standard variable rates through its new offering.

“Once upon a time, people purchased their home armed with the motivation of that great Australian dream – owning your own home,” Loan Ave director Paul Collins said.

“In today’s market, savvy buyers must be armed with the best financial tools.”

Mr Collins is concerned that most people still feel a mortgage is something they’ll be chained to for the rest of their lives, and said there has been little innovation in this area of the market.

“Rapid Freedom is set to challenge current thinking by helping people restructure their loan portfolio to achieve their goals and get ahead sooner,” he said.

“This is an opportunity to take advantage of record-low interest rates and make serious headway down the path to home ownership.”

Loan Reducer is a patent-protected system that allows the lender to establish their required interest margin for risk against each loan, set the overall interest rate required, and calculate the appropriate interest for each loan.

The calculator operates with a ceiling rate on the investment loan (the Reserve Bank’s cash rate plus 3.5 per cent) and a floor rate on the owner-occupied loan as low as 2.5 per cent (RBA cash rate plus 0.5 per cent). The Loan Reducer calculator enables a lender to set their required interest rate return – arriving at the level of discount possible on the owner-occupied loan and the interest rate in the investment loan.

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