9News: Perk Problems

Peter Overton: 200,000 frequent flyer points might be an attractive perk when taking out a home loan but be warned.

9News has figures that show the value of those points is minuscule compared to what you have to fork out in the long run

Ross Greenwood: It’s the home loan equivalent of the marshmallow test.

Kids are told they can have one right now, but if they wait and don’t eat it – later on, they can have two.

The home loan equivalent of the marshmallow test if frequent flyer points.

Sally Tindall: Banks are desperate for customers businesses so they are throwing offer of cash-back, they are throwing offers of frequent flyer points.

Ross: It’s easy to get cynical and think the more you get fringe benefits, the more you pay. And in the case of a home loan, thought he frills might be worth $1000 or $2000…it could end up costing you tens of thousands of dollars in interest over the life of your loan.

One example, Westpac offers 200,000 Velocity Points with its Premier Advantage Package Rocket Repay home loan.

The value? $1959.

But the loan rate is 4.4 percent, compared with the cheapest variable loan rate of 3.49 percent. Over 30 years – the difference is $66,842.

Sally: A rock-bottom variable rate home loan with trump an offer of frequent flyer points almost every time.

Ross: And it’s not just points. St George offers $1,500 cash upfront for its Advantage Package home loan.

The rate – 4.4 per cent. Over the lift of that loan, again $66,000.

Sally: Don’t use marketing gimmicks as your first point of research.

Ross: Even the best marshmallow loans will still cost.

Virgin Money’s rewards 630,000 Velocity Points worth $6,170. The rate looks good – 3.68 per cent. But it’s not the cheapest. Over 30 years, that deal costs you $7039.

One person who has been tempted in Nick Panchal from St Marys who borrowed to build a new home at Riverton for his growing family.

Nick Panchal: It was about 350,000 reward points and for that I could buy anything from the store.

Ross: This interest rate was under four percent, but he sees it differently.

Nick: It could repay the loan and fees for the next two to three years.

Ross: Ross Greenwood, Nine News.

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