Is a home loan from a big 4 lender really better?
It’s probably no surprise to you that more and more people are choosing their mortgage from smaller lenders instead of the major banks. You could be one of these people – if not and you’re curious, here’s why smaller banks and mortgage lenders are stealing market share away from the major banks.
These smaller home loan lenders don’t have the huge overheads that the big banks do, so they can provide stiff competition, incentives and discounted rates. Home owners are beginning to shop around and realising that jumping ship could save them a load of money – in fact, people choosing a major bank as their lender have decreased by 0.52% compared with 2012.
According to financial comparison website RateCity, one in six borrowers are choosing smaller lenders for their home loan in preference to one of the big four banks.
RateCity CEO Alex Parsons says: “People are getting smarter with their mortgages and realising that paying the higher rates is a waste of their money. As cost of living pressures bite, making a few tweaks to your home loan or refinancing into a lower rate can save upwards of $1000 a year on a typical $300,000 mortgage – where else can you find savings like that in your budget?”
So, what’s the difference between a big bank and a small lender?
The big four
They have a large customer base and more assets, which allows them to offer an extensive range of services, including 24/7 customer service and a larger number of ATM’s. Customers can also access a huge range of products to choose from.
The downside of choosing a big bank is mainly in the area of service. Many people feel that they’re treated as a number, not a human being. And because they operate with profits in mind, monthly account fees can be high, and term deposit interest rates can be low.
Credit unions, mutual banks and building societies
These are often not for profit financial institutions that operate on behalf of their members. There are advantages to this – they are able to provide specialised tailored services. They are also able to provide more personal service.
But the big advantage is the ability to offer attractive interest rates across the board – lower rates for your home loan and credit cards, higher rates on savings accounts.
Remember though, they typically have fewer assets, so they often can’t offer the same amount of services as the big four.
So, what should you choose?
Buying a home or an investment property is one of the biggest purchases you’ll ever make in life. So there’s no substitution for talking to an expert such as a mortgage broker before you buy. They’ll take you through the different home loan options so you can make an informed decision.
