Brokers Report Non-Major Banks Gaining Popularity

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An increasing number of mortgage applications have been submitted to non-major banks, indicating that Australia’s appetite for mortgage lenders outside of the Big Four may increase, according to the results of the latest Broker Pulse survey.

The survey found that 90% of brokers sent a loan to at least one non-primary bank in October 2021. This is a large increase from the 79% recorded the previous month – the highest proportion. high recorded since May 2021.

The main banks are Commonwealth Bank, Westpac, NAB and ANZ.

According to the survey, which received 252 responses from members between November 1 and November 12, 2021, Macquarie Bank continues to be the most popular lender outside of the Big Four. Next come ING, as well as the main banking subsidiaries, St. George (Westpac) and Bankwest (CommBank)

Michael Johnson, Chief Strategy Officer of Momentum Intelligence, said of the results: “We see changes between lender segments fairly regularly, but what’s interesting about this is that the big banks are generally doing quite well right now.”

“In the past we have seen these lenders with extremely long lead times and poor brokerage experiences – but now they perform significantly better but still seem to have lost some traction compared to non-major banks,“said Mr Johnson.

“It’s clearly a competitive market right now and overall, non-majors continue to serve a wide variety of borrowers and brokers. “

It’s no surprise that the Big Four, which have historically boasted the lion’s share of home loan customers, are seeing their competition intensify.

With mortgage rates at record highs, customers have more purchasing power and are in a better position to research their best mortgage option. Additionally, it is easier for clients to repay their loans, which has resulted in the approval of an increasing number of new home loans year by year, according to ABS loan indicators.

And thanks to technology, more and more Australian buyers have the power to research potentially more competitive home loan options at the push of a button than ever before. Online comparison tools, such as charts and calculators, give clients the flexibility to be their own broker and create a shortlist of home loans that may be right for them.

The attractiveness of non-major banks

So what are the benefits of choosing a non-primary bank for your home loan? Perhaps the biggest advantage is that they may be able to offer lower interest rates and charge less fees.

To compete with the big banks, competing lenders can differentiate themselves in the market by offering lower prices. Small banks, especially online banks and / or neobanks, have less overhead as they may not provide as many branches, agency staff, etc. This allows them to pass these savings on to their customers.

According to the RateCity database, the average variable rate of owner-occupier mortgage loans from the big four banks (principal and interest) is 35 basis points higher than the combined average of all other lenders in the market. The average mortgage rate of the big banks for this type of mortgage is 3.44%, while the average interest rate for this type of mortgage over the whole market and excluding the big banks is 3.09%.

While the interest rate you will be offered will depend on your financial situation and credit history, it is always worth checking to see if other lenders in the market can offer you a more competitive offer.

Another advantage of opting for a non-major bank is that it can offer more innovation, especially in the fintech field. Non-major banks typically have less red tape and fewer executives having to approve new products or tools, so they can bring new technology to their customers at a faster pace than large banks.

For example, the big bank Westpac was the last of the majors to offer its customers the option of paying with Apple Pay. It approved the technology in 2020, five years after its launch in Australia, with American Express being the first institute to authorize it. While the big bank ANZ adopted Apple Pay in 2016, this example still reflects the delay that big bank customers may experience for new technology and innovation.

Why Australians still love big banks

Despite the growing use of non-major banks for mortgage applications, the latest Broker Pulse survey consistently indicated that Australia’s largest bank, Commonwealth Bank, remains the most frequently used lender (44% of applications)

There are advantages to considering a large bank for your mortgage, including the simple convenience of their access points both online and physically, through branches and ATMs.

In addition, there is a sense of security offered by the big banks. As ADI, they are supported by the Financial Claims Scheme (FCS). This means that if the bank goes bankrupt, the FCS protects your deposit with said bank up to $ 250,000. Many other non-majors enjoy this same protection, but with the bigger banks, there is a greater feeling that they won’t go bankrupt anytime soon.

Ultimately, the final decision depends on the borrowers’ goals for the property, as well as their financial standing. But with a range of home loan providers in the market offering competitive home loans, it’s a timely reminder that potential borrowers should compare their options before signing on the dotted line.


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