Professional Pack Mortgage Home Loans. Has competition from non bank mortgage lenders eroded their meaning and even value?
19/12/2011 
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Professional Home loan packages or ‘pro packs’ were once restricted to people with high income professions and qualifications such as doctors, lawyers, accountants and engineers and senior managers.
But now they’re available to any home buyer and, in some cases, require combined borrowings of just $150,000 to activate. As the average mortgage home loan is now around double that, it means everyone that can qualiy for a home loan can also qualify for a “propack” mortgage, insurance and credit card package.
So what are the real alternatives today, and are they a better home loan alternative for you? Are you better off in fact buying your financial products separately. After all banks, the main source of propacks don’t have their own insurance arms, they acts as agents for other players in the market, and the credit card offers can come with a hefty annual package fee that needs to be calculated into the interest rate savings you see what your savings, if any, are.
The main advantage of packaging is an interest rate discount, but you’ll also get reduced fees on other products like transaction accounts, fee-free credit cards and even bonus interest on term deposits.
They are attractive to people who borrow large amounts but also to people who want the convenience of having all their banking products in one place.
“You are going to get an interest rate which is going to be less than the advertised standard variable rate of the big four banks,” Ms Montgomery says.
“For example, if the standard variable rate is 8.07 per cent, most pro packs are 0.60 or 0.70 per cent off that which brings it down to around 7.37 per cent.”
This makes it look “roughly like a basic variable”, says Warren O’Rourke from broker Mortgage Choice.
“You have to ask yourself what the difference is between going for a standard variable with a discount as opposed to going for basic variable,” he says.
“You don’t always necessarily get a 0.70 per cent discount straight away. A lot of the lenders will have different tiers and it might start at 0.40 per cent . . . and then up to 0.60 and possibly 0.70 depending on the amount that’s being borrowed.”
But while packaging can help streamline your banking, it can also limit your options. “Some people don’t want gold cards and some people have their own insurance so there are features (of packaging) which might be less attractive,” Mr O’Rourke says.
The other catch is an annual fee which can range from $350 to $390, he says.
“That can sometimes add up to be quite a bit over the term of the loan, so you really need to make sure that you’re getting good value,” Ms Montgomery says.
“Some borrowers might get to a point in the life of the loan where the annual fee outweighs the benefit because the loan amount is reduced.
“Today, everyone is competing with everyone else on a fairly level playing field so pro packs are no longer that exclusive club that they once were.”
Nonetheless, data from broker Smartline shows more than 52 per cent of all home loans written in the June quarter were part of a professional package, compared with just 38 per cent the previous year.
Ultimately, the most exclusive loan is the one that works best for you. “There are still some variable rate loans out there that are equal if not similar in terms of interest rate without fees,” Ms Montgomery says.
“Look at all the offerings on the table and then make that choice.”
Sunday Mail
Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers.
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