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Are all lenders the same??

The ‘Big 4’ banks have maintained a dominant profile in the complex and ever-changing Australian finance market – just think about how often you read about them in the news! And it is this high profile in our everyday lives that has contributed to a perception that all lenders are the same.

Is that what you think?

In fact, Australian consumers are spoilt for choice…

Did you know there are over 40 banks (plus multiple foreign bank branches) and around 60 credit unions and building societies in Australia* as well as a number of non-bank lenders?

Of course if you are receiving this email you would already know that one of the key advantages of using our mortgage broking services – as your finance specialist – is that we have access to a range of lenders when seeking a loan that may be suitable for your individual circumstances. We are not tied to just one lender and their available loan products.  (Eg, if you walked into a Westpac branch, do you think they would tell you what CBA are offering??!!)

So what is the difference between the lender types?

Banks

  • Banks are authorised deposit taking institutions (ADIs) and can use their own funds to provide home loans.
  • They provide integrated banking packages including savings, transaction accounts and credit cards.
  • Wide branch networks provide additional service but also contribute significantly to overhead costs.

Second tier banks

  • Second tier banks are those that are not part of the Big 4. They include a surprising number of household names such as ING Direct, Bank of Queensland, Macquarie Bank, Suncorp, ME Bank, Bendigo and Adelaide Bank, St George, Bankwest, Citibank and AMP Bank.
  • While some are now owned by the big banks it is worth considering their competitive offerings.

Building societies and credit unions

  • These non-profit cooperatives are owned by the people who use their services so each member is both a customer and a shareholder.
  • Rates can be very competitive.
  • Member deposits are used to fund loans.
  • Like banks, they offer a wide variety of banking facilities with a focus on customer service.
  • They are regulated in the same way as banks.

Non bank lenders

  • They do not hold an Australian banking licence so cannot accept deposits therefore they source wholesale funding via investors, financiers, trusts and even the Big 4 banks.
  • They do not have the overheads of an extensive branch or ATM network.
  • The appeal for customers has been competitive interest rates, more flexible lending criteria (eg for low doc or non-conforming loans) and higher loan to valuation ratios (LVRs). Low rates are however often balanced by higher fees.
  • An emphasis on customer service, faster loan processing times and responsiveness are other selling points compared to the big banks.
  • Tend to have limited products and services so they may not be suitable for all your financial needs.

So do we recommend the Big 4 to clients?

The Big 4 are strong competitors with broad product ranges so if they have a solution suitable for your individual circumstances then of course we do!   However, we may also recommend second tier banks or non-bank lenders if their product, pricing and services are ideal for you.

Most importantly, you will have the confidence of knowing we only recommend lenders that have provided a good personal experience for our other clients.

Call our office today on 8004 2222 if you would like us to take the legwork out of your search for lenders….or ask us for a copy of our article “Is switching loans a suitable alternative for me?”

  • * apra.gov.au

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