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Lender to phase out 'discounted' rates

by Reporter10 minute read

One of Australia’s lenders has announced plans to phase out ‘borrower discounts’ and instead use advertising to showcase its ‘true rate’.

Yellow Brick Road said that by phasing out its discount variable rate advertising in favour of “true rate” advertising, it will be able to present consumers with the real rate they will pay on their home loan.

The company, which has announced the introduction of its Rate Smasher variable home loan, will be advertising only the true 4.99 per cent per annum rate (underlying variable rate of 4.98 per cent), which has been tipped as the lowest variable rate on offer from any branch-based financial institution.

The company is calling on all lenders to follow suit in an attempt to help consumers better understand the real rate that they’ll be paying on their mortgage, without the frills of fancy discounts and introductory offers.


Discounting was originally introduced as a privilege for private banking clients. Then in the '90s, the banks brought out professional packs that enabled them to give preferential rates to clients who borrowed larger loan amounts.

This discounting strategy has been adopted by the industry to the point that now the discounts have become the standalone feature in advertising, leaving consumers to dig for the actual interest rate they will pay.

“This is a smart strategy for lenders that want to bury their true rate, but it leaves consumers completely in the dark,” Yellow Brick Road executive chairman Mark Bouris said.

“We’ve received that feedback from our customers and we are taking into account how discount advertising is affecting their borrowing decisions. That’s why we have changed our positioning and are taking the first step towards true rate advertising.

“It comes down to keeping people educated and informed, and as honeymoon and discount rates are splashed around the media, people are getting more confused about what they are actually paying.

 “We know that we are giving people the best deal, and that’s why we’re headlining with a true rate, which we believe is the best rate on offer from any branch-based lender.”

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