Rate discounts dominate X Inc branding

The current national advertising campaign of aggregator X Inc Finance emphasises a 92 basis point discount on interest rates to borrowers, a somewhat discordant claim at a time banks are thought to be trimming and restricting the availability of rate discounts.

The lender offering 92 bps off a notional standard variable rate turns out to be X Inc itself, through its subsidiary brand Economy Home Loans' banner. GE Money is the chief funder of home loans under the Economy brand.

High exit costs for the standard variable loan offered by Economy help to maintain customers, with a 1.8 per cent charge on the original loan amount for exiting after a year, with a sliding scale reducing the exit fee to 0.5 per cent after five years.

To maintain borrower loyalty, a further ten point reduction for the life of the loan is then offered after five years.

X Inc national manager operations and risk, Ivan Karamatic, says that if a borrower would prefer a more established loan product from a bigger lender, the ongoing variable can always be negotiated down, but at the expense of added costs.

"Seventy points off is pretty much run of the mill across the major lenders, but this is usually under a package scenario where you pay an annual fee.

"Some brokers have achieved up to one per cent off, but that will always be for the much higher loans. The million pluses.

"Lenders though right now with the credit squeeze and the higher cost of funding, getting them to budge for a loan less than $750,000 is very difficult."

Economy Home Loans products include honeymoon product, ongoing variable and fixed rate offerings.

The advertised 92 point saving was initially based on the 8.57 per cent big bank variable, but as this has changed and the Economy product has increased 15 points to 7.75 per cent, the interest rate differential to the major banks is now slightly different.