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Lender to drop rates as borrowers pay off mortgage

Fintech lender Athena Home Loans has launched a new mortgage product that automatically drops variable rates for borrowers with P&I repayments as they pay down their home loan.

Digital home loan platform Athena Home Loans, founded by former NAB executives Nathan Walsh and Michael Starkey, has launched a new product suite for owner-occupiers and investors that automatically drops the customer’s variable rates when they reach a new loan-to-value ratio (LVR) tier.

The AcceleRates suite adjusts interest rates for borrowers with principal and interest (P&I) repayments when they drop from an 80 per cent LVR to a 70 per cent LVR, and then again when they reach a 60 per cent LVR.

Starting at 2.54 per cent (2.46 per cent comparison) for owner-occupiers with an 80 per cent LVR, the rate would drop to 2.49 per cent when their loan falls to a 70 per cent LVR, and then to 2.39 per cent when they reach a 60 per cent LVR.

Meanwhile, investors would see rates drop from 2.94 per cent to 2.89 per cent, then to 2.79 per cent under the same LVR tiers.

According to Athena, customers could save up to $70,000 over the life of their loan under the AcceleRates pricing model (compared with a traditional lender).

New customers who apply from 12 August will settle with the new rates.

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Speaking to Mortgage Business, Athena CEO and co-founder Nathan Walsh explained: “When you think about what we’re doing with AcceleRates and how the rate gets better as you pay down the loan, that is so very different to the rest of the industry, which is dominated by what we call ‘Scorpion Loans’ – this idea that customers get a shiny headline rate but under the hood there are hidden fees and rate creep. A sting in the tail.

“Typically, you would see mortgage comparison rates much higher than the headline rate, but unfortunately, customers just aren’t aware of how that can wind up costing them tens of thousands of dollars over the loan. So, we just think there is real opportunity to do better for customers.”

The non-bank lender CEO added that all existing customers will also receive the new rates for their equivalent LVR tier on 30 September 2020. 

Mr Walsh stated: “The typical model in the mortgage industry is that rates go up over time. The gap between new borrower offers and the average price in market is actually the biggest it has ever been. There is a loyalty tax where existing customers end up paying a lot more [than new ones].

“We set up Athena with a mission to help Aussies pay off their home loans faster. We guarantee to our customers that we will never charge existing customers more than new customers on a like-to-like loan. We’re the only loyalty tax-free lender in home loans in Australia. And so, we’re passing the rates on to new and existing customers at exactly the same time so that they get the same benefit for each of their LVR tiers to ensure we are giving them the same proposition.”

He continued: “So, if customers are below 60 per cent LVR, they will be moving from their current rate – 2.59 per cent – to 2.39 per cent in September. So, for all customers, new and existing, they will get the benefit of these new rates as at the 30 September.”

‘Borrowers are so frustrated by the painful negotiations with their current lender’: Athena CEO

The move forms part of the fintech’s mission to help borrowers pay off their mortgages faster, according to the CEO and co-founder.

“Aussie borrowers are so frustrated by the painful negotiations with their current lender in order to get a fair rate. That’s why Athena wants to motivate, encourage and reward customers for paying off their home loan and also have peace of mind knowing that once they hit the lower tier, we will drop their rates for them automatically,” he said.

“What this also means is even greater savings for our customers,” Mr Walsh added.

According to COO and co-founder Michael Starkey, the new product suite also enables customers to pay off their loan more quickly.

“Customers will spend most of the life of their loan on our lowest rate,” he said.

“If they start out at the 80 per cent LVR tier and pay the minimum on a principal and interest loan, they will hit the 70 per cent LVR tier in only four years and two months. From there, they would hit our lowest rate in just three years and nine months, where they would stay for the rest of the loan.”

Mr Starkey added that customers making additional repayments would therefore get to the lowest rate band “even faster”.

The new product suite sits alongside Athena’s Automatic Rate Match offer, which automatically adjusts the rate for existing customers if the lender releases a lower rate offer for new customers on a like-for-like loan. 

The direct-to-customer lender has reportedly settled $1.6 billion in loans since officially launching its home loan product last year.

When asked whether the lender had any plans to offer the products through the third-party channel, Mr Walsh stated: “We are focused on a direct, digital model today. We recognise brokers are an incredibly important part of the market and will always will be so, but today Athena is a direct proposition.”

The fintech is backed by a number of financiers, including Macquarie Bank, Resimac, HostPlus, AustralianSuper, Square Peg, AirTree and Apex Capital.

It recently raised $70 million in a series C capital funding round, taking the lender’s total raise to $115 million.

[Related: Home loan fintech closes $70m capital raise]

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