Rates break the bank

Online lenders offer cheaper mortgage deals

HOME loan customers choosing online-only lenders instead of bricks and mortar financial institutions are scoring significantly cheaper interest rates, saving themselves thousands of dollars a year.

Borrowers are being urged to look beyond the big four banks and to smaller online lenders, which are offering some of the industry’s most competitive deals.

Online-only lenders have rates as low as 3.39 per cent while the average big four variable rate is more than one percentage point higher.

But despite this the home loan market has remained extremely competitive with lenders itching for new business.

New analysis by financial comparison website Mozo has found on the average $300,000 30-year loan, a customer making principal and interest repayments can save up to $2600 per year by switching to the cheapest online lender Reduce Home Loans’ deal of 3.39 per cent.

Over the life of the loan it could save the borrower nearly $78,000.

In comparison, the average big four home loan variable rate is 4.64 per cent — a difference of 1.25 per cent.

But Aussie Home Loans’ chief executive officer James Symond warned borrowers shouldn’t just focus on the interest rate.

“Borrowers need to carefully consider the credentials of the lender in areas like track record, branch network, product range and services provided to them,’’ he said.

“Of course online lenders can provide sharp rates as they do not have to support a branch network, people, compliance and a range of other features that are essential in servicing a customer properly.”

Owner-occupiers paying both principal and interest can score deals below 4 per cent, while for investors many deals are slightly higher.

The Reserve Bank of Australia board is due to meet again tomorrow and it’s expected it will keep the cash rate on hold at 1.5 per cent — where it has stayed since August 2016.

Mozo spokeswoman Kirsty Lamont said “borrowers need to look outside the big banks.”