Does Your Australian Mortgage Have to Come From a Big Four Bank?

April 15, 2012 by  Filed under: Loans 

If you’ve been thinking of applying for an Australian home loan for a new purchase or a refinance, it’s likely that your first thought was to apply to a Big Four bank. These banks are well known and convenient, and you may even have a family history of doing business with one.

NAB, Commonwealth Bank, ANZ and Westpac offer plenty of peace of mind in the form of stability and good reputations among borrowers. However, there are also plenty of benefits to choosing a bank outside of the Big Four. In some cases, those benefits are even driving homeowners to refinance their big-bank loans with ones from smaller competitors.

Lower Rates on Australian Mortgages

A big bank doesn’t have to mean big rates, but many times that is the case for borrowers. Since 2010, the number of people changing their mortgages from Big Four banks to smaller lenders has been increasing. According to The West Australian, the increase in Big Four defectors is being caused by the lower rates that many find on mortgages from smaller lenders. In some cases, the rates can be more than a full percentage point lower at smaller lenders than the standard rates found at the Big Four for comparable mortgages.

While it was once hard to shop among a large number of lenders, particularly among banks that don’t have a local branch close by, that is no longer the case. The ease of searching online for the best rates among a dozen or more mortgage lenders has meant that it’s now possible to find a wider variety of rates and to look at how each bank’s rates stacks up with the rest.

A Wider Range of Terms

With more than just the largest banks to choose from, home buyers can find a bank that offers terms that they find the most favorable. While one bank may not offer a long-term loan for a specific rate, with a dozen smaller banks to choose from, the chances increase for finding one that will offer a longer term. Borrowers can also shop for banks that offer larger loan amounts or that charge smaller account fees.

Not only does having a wider number of banks to choose from affect buyers, it also affects lenders. Larger banks now understand that they are no longer in competition only with each other. Thanks to websites that offer fast lending quotes, large banks are now in competition with every bank that offers Australian home loans. To remain competitive, they will have to offer rates and terms that are comparable with smaller lenders. This may force an overall trend toward lower rates and more versatile terms over time if larger lenders continue to lose business to small banks that work hard to gain new customers.

Tomorrow Finance offers home loan comparison software to help people compare hundreds of home loans from Australia’s lenders. Find out how much you can save simply by choosing a loan with the best home loan rates.

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