Borrowers think small
The big banks don’t always offer the cheapest deals, writes Sophie Elsworth
SAVVY borrowers who are on the lookout for better mortgage deals are turning to smaller lenders to save money.
Australia’ s customer-owned banking sector’s portion of housing loans climbed by 7.8 per cent in the 12 months to June, in contrast to the major banks, whose share grew by just 2.6 per cent.
However, the big four banks still dominate, holding 82.1 per cent of all housing loans in June, according to banking regulator data. Customer-owned banks, such as credit unions, held 5.4 per cent and other lenders had 12.5 per cent.
A spotlight was put on the big four banks last month when they failed to pass on the Reserve Bank of Australia’s 0.25 per cent cash rate cut in full. The big four lenders – the Commonwealth Bank, Westpac, ANZ and NAB – passed on cuts between 0.13 and 0.15 percentage points.
Simmone Le Raye, 39, is among those who have opted to try smaller banks. This year she re financed her three-bedroom home, switching her mortgage from NABtolenderME.
Paying an exorbitant interest rate of 4.76 per cent, she said to her husband Michael, “Let’s get away from the big four banks and look elsewhere”.
“We went from paying 4.76 per cent down to a three-year fixed rate of 3.73 per cent,” Mrs Le Raye said. “We are now paying $90 less per week than when we were with NAB.”
The pair consolidated their credit card debt into their mortgage and also purchased new furniture, taking out a loan of $260,000. Their repayments fell to $270 per week.
Federal Treasurer Josh
Frydenberg last month ordered the consumer watchdog, the Australian Competition and Consumer Commission, to investigate the big banks’ refusal to pass on the recent spate of interest rate cuts in full.
The Customer Owned Banking Association’s director of strategy, Sally Mackenzie, said the financial services royal commission had “highlighted the benefit to look around at other providers in the market”.
“There are some really good alternatives out there in the market if people look beyond the big four,” she said.
Canstar found, on a $300,000 30-year home loan, the average variable rate for the big four banks was 4.01 per cent, compared with 3.82 per cent for the rest of the market.
For a borrower paying 4.01 per cent, their monthly repayments would be $1434 compared with those on 3.82 per cent paying $1401. It’s a saving of $11,770 over the life of theloan.
Mortgage Choice broker Scott Bament said he was writing a lot of loans with smaller lenders.
“I think the big four banks have lost a lot of trust,” he said.
“Customers are more than happy to look at other institutions.”
Mr Bament said owner-occupier borrowers paying principal and interest should be looking for rates “in the very low threes”.
‘We are now paying $90 less per week’ Former NAB customer Simmone Le Raye