Adjustments to discount rates and valuation materiality default

Discussion in 'Loans & Mortgage Brokers' started by Dalien, 26th Jan, 2019.

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  1. Dalien

    Dalien Member

    Joined:
    18th Aug, 2018
    Posts:
    15
    Location:
    Melbourne
    Hi all,

    I read a lot about rate creep. Do the banks do this by modify your discounts?

    My loan is with the NAB(split) P&I ppor taken out in September 2018 choice package

    fixed 5 yr 4.09% - has a .85 product discount,

    variable 3.82% - has a .6 product discount and .82 customer discount.

    Which discount do they change? Does NAB have the reputation of doing this?

    Additional question.
    At the end of the fixed term, is it normal and easy to switch the fixed loan to the higher discount loan?

    On another note, I read a default on the loan is a material change in price value. What percentage is material, and with the current market corrections how likely will this be triggered?
    (I note the market would need to drop a further 15% for me before I lost any equity due to bargain obtained)
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    2,181
    Location:
    Australia
    Where did you read this?
     
  3. Dalien

    Dalien Member

    Joined:
    18th Aug, 2018
    Posts:
    15
    Location:
    Melbourne
    My loan contract.
     
  4. Arman_S

    Arman_S New Member

    Joined:
    1st Feb, 2019
    Posts:
    3
    Location:
    Sydney
    Your discounts remain the same because they're stipulated on the contract, but they may increase the non-discounted variable rate and offer a bigger discount to customers taking up a new loan. Hence a customer taking up a new loan effectively obtains a lower interest rate.

    I don't know of a particular threshold, but I suspect if you always make your repayments on time, it is unlikely for the bank to take action.