DISCOVERY Bank has launched its new Home Loan product in a key milestone as the bank expands its growing footprint.
The bank, which was launched in March 2019 by Discovery Limited, is the world's first behavioural bank.
The digital bank yesterday said it would offer clients competitive, personalised rates based on their individual risk profiles, and use its established shared-value banking model to enable clients to further reduce their interest rate by up to 1% at a time when the current prime lending rate is at a 14-year-high of 11.75%.
This would be done by managing their money well with Vitality Money and protecting their home loan and their home with the relevant insurance products Discovery offered.
Discovery Bank will face stiff competition against established players.
According to Statista, Standard Bank, Absa, and FNB were the largest residential mortgage lenders in South Africa in 2020, when considering the number of mortgage transactions.
Discovery Bank said, “Clients can lock in a market-related rate upfront, and dynamically reduce interest repayments by managing their money well to save over the long term.
Its client-base could save up to R2.8 billion in interest repayments on their current loans, and with the same model South Africans could save up to R12.2bn a year, it said.
Discovery Bank CEO Hylton Kallner said this was a highly anticipated milestone for the bank as it opened the virtual doors to their home loans ecosystem.
“Those looking to buy a new home or wanting to upgrade their home can enjoy a full ecosystem of benefits and tailor-made services on the Discovery Bank app,” Kallner said.
“Our clients have comprehensive homeowner support alongside our home loans, with protection products for their homes and family, access to additional financing of energy solutions, and various rewards,” Kallner said.
The bank said if clients managed their money well, they created less risk and more value for Discovery Bank.
“The behaviours that are rewarded include saving, being adequately insured, investing for retirements, and paying off home loans faster.
“The bank shares the value from these financial behaviours back with clients in the form of better interest rates and other rewards linked to the Vitality Money programme.
“The better clients manage their money, the higher their Vitality Money status and the better their rewards. Through the combination of Vitality Money, the Home Loan Protector and Building and Contents Cover, Discovery Bank home loan clients can lower their interest rates by up to 1%,” it said.
All clients who take out new home loans, switch home loans or refinance their homes with Discovery Bank can qualify for the shared-value interest rate discount.
“We feel motivated to change the landscape of homeownership. The unique nature of home loans means client and asset risk typically reduce over time. With high costs negatively impacting repricing or switching to a different bank, the result is that an estimated 60% of our clients are overpaying on their existing home loans today,” Kallner said.
The Discovery Bank Home Loan offering is administered by SA Home Loans, following the initial in-app application.
However, the launch of the home loan product comes at a time that South Africans are under immense financial stress amid a cost of living crisis and a moribund economy, characterised by sky-rocketing unemployment.
In March, according to the Experian Consumer Default Index debt defaults ballooned in quarter four 2023 as mid-to-high affluence South African consumers with home loans, vehicle loans, personal loans, credit cards and retail loan accounts increasingly struggled to keep up with their repayments.
The index revealed that rolling default behaviour deteriorated from 3.97 to 4.68 – a relative change of 18%.
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