Small Lenders vs The Big Four

Small Lenders vs The Big Four

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Choosing the right loan for you can often be daunting. There are many traditional lenders to consider when looking for a home loan, including small lenders or the Big Four banks; your mortgage broker can guide you through the choice of lenders.

Here we will look at the differences:

The Big Four banks are commonly known as ANZ, Commonwealth, National Australia Bank, and Westpac. These are the first-tier lenders and contribute 70% to 75% of the home loan market.
The Small Lenders are referred to as the second-tier lenders. These include Suncorp, Bank West, ING Direct, AMP, CitiBank, Bank of Queensland, Bendigo Bank, Heritage Bank, just to name a few.

Comparing Small Lenders to the Big Four Banks:

Interest Rates and Fees – Small Lenders whilst having fewer branches can often be more competitive with interest rates and fees. This is due to the Smaller Lenders having reduced overheads. However, don’t discard using one of the Big Four Banks as often your mortgage broker can negotiate a more competitive interest rate with them.

Home Loan Products – All lending institutions have something different to offer to potential clients.
Small Lenders often have niche products available that the Big Four do not. This may include accepting different types of employment (casual, part time, contractor’s as an example) However, the Big Four can offer professional package home loans that the smaller lenders cannot. An example of this is that a professional package will have an offset facility against the home loan which may not be available with a smaller lender.

Approval Times – When any lender offer’s such a great rate/product this can have a surge of applicant’s and weather you go with a small lender or one of the big 4 this can blowout approval times. Best practice with your broker is not only finding a suitable rate/product but also finding out approval times as this can be the big difference in being able to buy your home in front of other’s.

Customer Service – Generally, small lenders will only have branches in major cities and towns. This means customers have limited access to branches in regional areas. This can be an inconvenience; however most small lenders offer internet and phone banking. The Big Four will have multiple branches in major cities, towns and regional areas, along with internet and phone banking as well. With a smaller client database, Small Lenders often offer a more personalised service to their customers. This mean there is more chance you will be dealing with the same staff member each time you call. However, the Big Four have a larger number of employees so you will not always talk to the same person.

Whether you choose a Small Lender or one of the Big Four Banks is your choice and what is right for your situation. Remember your mortgage broker is there to help you through this process of choosing the right loan with the right bank. Call us at the office if you want any further info or think your home lone is due for a review, we are here to help!


Cash Rate Drops to New Low of 1.5%

Cash Rate Drops to New Low of 1.5%

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With a newly formed government now in power, and extremely weak inflation levels, the Reserve Bank of Australian (RBA) has decided to reduce the official cash rate by 25 points, taking it to the new historical low of 1.5%.

Glenn StevensGovernor Glenn Stevens of the RBA had this to say in his official statement:
“Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.”

“Supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. The most recent information suggests that dwelling prices have been rising only moderately over the course of this year, with considerable supply of apartments scheduled to come on stream over the next couple of years, particularly in the eastern capital cities. Growth in lending for housing purposes has slowed a little this year. All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished.”

So, what does all this mean for you? Well if you have a mortgage then the news is good there are some great rates around. The banks however have not passed on the full cash rate drop as they often buy money from external providers (Over Seas Banks).

If you are looking to leave your money with the banks in a savings account then the news is not great, as the interest Interest Rate Crashyou expect will probably be lower than the inflation rate, which means your money is going backwards and not worth as much as when you put it in there.

I would be having a look at other investment options and maybe buying an investment property, share or managed funds could be an option.

As this month’s decision has proved, rates can change at any time. Now is the time to consider whether your current loan is the right one for you, right now.

If you would like me to have a quick check and see if we can get you a better deal on your mortgage (and it’s a lot easier to change than you think) then give me a call on 0434 449 455.

Cheers Chris