May 16

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When the BIG 4 shut the door

By James

May 16, 2019


There is no
doubt that the ‘Big 4’ banks (NAB, CBA, ANZ and Westpac) have maintained a
dominant profile in the Australian finance market.

Many of us grew
up with the CBA Dollarmite bank accounts which are still in use throughout
Australian primary schools.

There is comfort
in knowing your mortgage is with one of the big banks but now more than ever,
and in this highly scrutinised lending environment, you the consumer have
choice…. and plenty of it.

Did you
know there are over 120 lenders in Australia including banks, non-bank and
second tier lenders
1?

So when the Big
4 shut the door, don’t despair, you do have options and sometimes you may be
far better off without the banks!

First let us
explain the difference between lenders. 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 and have wide branch networks. Second tier lenders

Second tier
lenders are those that are not part of the Big 4. They include a surprising
number of household names such as ING Direct, Suncorp, ME Bank, Citibank and
AMP Bank to name a few.

While some are now owned by the big banks it is worth
considering their competitive offerings. They usually have few or no branches,
lower overheads, focus on customer service and provide niche products.

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. Member deposits are used to fund loans. Their rates can be very
competitive. 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 typically offer competitive interest
rates, more flexible lending criteria, faster loan processing time,
responsiveness and emphasis on customer service. Non-bank share of housing lending is growing

Research in February 2019 reveals that ADIs rejected just over 40% of home loan applications, compared to 20% rejected by non-banks. Not surprisingly, non-bank annualised owner-occupied credit is growing at 17.6%2.

 Source: Digital Finance Analytics

The banks
with no loyalty

The
Big 4 offer discounts to new customers but where is the loyalty for existing
customers?

Let’s
say you were a keen borrower a few years ago on an interest rate of 3.9%, after
‘out of cycle interest rates hikes’, that loan would now be at around 4.8%. So
new customers are nabbing a better rate than existing customers – no client
loyalty there!

As
your mortgage finance specialist, we:

  • have access to many lenders – not just the Big 4
  • can re-negotiate your loan on your behalf, or
  • will investigate other lenders where you will be a new client and possibly have access to lower introductory rates.

DO
NOT go mortgage shopping by yourself. Each credit application you make will be
recorded on your credit history, and will affect your credit score.

Talk
to us before going directly to your bank.

If the Big 4 have shut the door on you, or you have been thinking about re-financing, contact
us TODAY. We will prepare your best position possible for application to the
lender most suited to your situation and requirements.

  1. Canstar, Home Loan Providers
  2. Mortgage Business/Digital Finance Analytics

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