Big Banks vs. Niche Lenders

In the past many prospective borrowers have been under the misconception that bigger is better when it comes to home loans.

However, the last couple of years have seen a significant decrease in the number of people choosing a major bank as their lender. Australians are now exploring their options and are showing a preference to niche lenders, and it’s no surprise given the competitive rates, various discounts and incentives they are offering.

In October 2013 Australian Prudential Regulation Authority data revealed that smaller banks and mortgage lenders are stealing market share and taking one-in-six Australians away from big banks.

As cost of living pressures bite, it’s important to be aware of the costs involved with each option. There’s a lot to be gained from comparing rates with this insight into the lending market.

Take a $300,000 loan for example; with an 80% loan to value ratio, and a 30-year period. If you were to go with one of the big banks you’d be looking at a discounted variable rate of 5.05%, an annual fee of $375 and an upfront fee of $200. The same size loan with one of the more niche lenders are offering a variable rate of 4.74% with higher upfront fees of $720 but no ongoing annual fees.

The end result between the two options equates to around $31,074 over the life of the loan, assuming rates remain constant. This is proof that bigger doesn’t always mean better. In fact, overall size really doesn’t matter.

There are some advantages of opting for the big banks like better internet banking, better branch network and inclusions like credit cards. Of course the factors important to each individual is different but it definitely pays to shop around for a competitive home loan.

We encourage you not to restrict yourself to the big banks as smaller lenders can often save you more money.

Shannon Ingram – Personal Mortgage Adviser : www.smartline.com.au/singram

Award winning mortgage broker Shannon Ingram became a Smartline Personal Mortgage Adviser in 2010, after eight years working for a major Australian bank.

Along with his wife, Shannon has bought and sold several properties. This gives him invaluable insight into his client’s experience. This resulted in Shannon winning the Smartline NSW/ACT Client Service Award in 2012. “I know from first-hand experience how stressful a time buying a property can be,” he said of his property purchases. “As a result, I always do my best to go above and beyond expectations and to do whatever is necessary to ensure a smooth process to get my clients into their new home.”

With all of the choices available on the market, Shannon believes a quality mortgage adviser can hand-pick the most appropriate option for every individual situation. “The right loan is going to be one that meets all of my client’s needs – including, of course, interest rate and fees, but also things like service levels and loan features.”

Managing the loan from start to finish enables Shannon to coordinate the best outcome between the client and the lender. He is happy to assist with any property purchase or refinancing arrangements.