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Standard Bank Tiered Interest Rate Option

Background

 

New home loan agreements currently only provide one interest rate which is applicable for the entire duration of the loan, up to 30 years. Standard Bank is looking to change this! Standard Bank will reward customers with a reducing repayment and effective interest rate as their loan is paid off.

 

The more you pay the less you pay!

How will this work?

The interest rate offered on new loan agreements will consist of up to three parts with a lower rate offered as the loan is paid off.

Example:

The interest rate on a R1 million loan will be broken up into up to three parts:

  • Tier 1: R800 000 to R 1 000 000 will be priced at 10.50%.
  • Tier 2: R600 000 to R 800 000 will be priced at 10.25%
  • Tier 3: R 0 to R 600 000 will be priced at 10.00%
  • Weighted average rate: 10.15%

 

How will the customer benefit?

The customer will benefit in the following ways: 

  • The interest rate will reduce as the loan is being repaid
  • The minimum repayment will reduce as the loan is repaid
  • The customer will save on interest charges as the loan is repaid

 

 

Why is Standard Bank doing this?

As the leading home loan provider in South Africa this innovative approach to pricing new loans supports our purpose “Africa is our home, we drive her growth”. Standard Bank believes that rewarding our customers as they pay off their home loan supports healthy financial management, which benefits our clients and the Bank.

 

How do I compare the tiered interest rate to a single interest rate?

The weighted average rate is provided for comparison purposes, the total interest charged can also be compared. The additional advantage to opting for the Standard Bank tiered interest rate is that an immediate interest rate reduction can be achieved if additional monthly or once off payments are made into the Standard Bank home loan. The single interest rate is always equal to the tier 1 rate.

 

Who will qualify for the tiered interest rates?

All applications for new home loans, other than the following home loan types; existing home loan agreements, applications with more than a 40% deposit, staff loan applications, applications in the name of a Juristic person, applications for vacant land, building loan applications, applications for development loans, EasySell applications, applications for JumpStart loans and applications for cost inclusive loans.

 

Does the customer have to take a tiered interest rate?

If the client does not want a tiered interest rate they can still opt for a single interest rate, this can be sent through to the home loan pricing team to amend the interest rate to a single interest rate.

Can a motivation still be provided to reduce the interest rate?

Where there is additional reasons to believe that the client may qualify for an improved rate this can still be sent through for review.

How will the repayments reduce?

The minimum repayments will reduce whenever the repayments is recalculated. A monthly recalculation occurs, the repayment will however only reduce when the reduction in repayment is more than 3%. We will also recalculate the repayment when interest rates change or when a a customer requests a recalculation of the repayment.

 

ACCES BOND AND PREPAYMENTS

The weighted average rate is linked to the outstanding balance. If the customer makes additional payments into their home loan, the weighted average rate will adjust accordingly(reduce). When the customer does a Re- advance, the weighted average rate will increase in line with the increase in the outstanding balance.

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