Australian lenders vary considerably in their rates, the loan products they offer, their turnaround times and many other factors. Let’s take a moment to explore the different lenders out there.
The Big Four
Commonwealth Bank, Westpac, ANZ and NAB. They form the four pillars of the Australian banking industry. The are the safest of all the lenders. They also own some tier 2 banks such as Bankwest, St George, Bank of Melbourne. They have massive bricks and mortar presence – which comes at a high operating cost. The high operating cost generally means that the home loan rates they offer tend to be higher than the other banks. They will usually have the broadest selection of loan products. They can also be the strictest on who they will lend to and are often the slowest to approve loans.
Tier 2 banks
They are the smaller banks and credit unions such as Suncorp, me bank, ING, Bank of Sydney, Bank Australia. Like the big four, they are classified as Authorised Deposit-taking Institutions (ADI’s) so they have degree of protection from the Australian government and must comply with the lending restrictions from APRA. They have fewer bank branches than the big four, meaning lower costs, and can often provide better lending rates for home loans. They are sometimes fast at approving loans (although several are rather slow).
Non-bank lenders are those that are not classified as an ADI. They don’t call themselves a “Bank”. Examples are Resimac, ASCF. They often get their funding through private equity – where institutions will invest funds in them and expect a return from these funds. They usually don’t have any bank branches and rely heavily on the mortgage broker community to source their borrowers. Consequently, they can usually offer extremely low and competitive rates. They are usually quite fast at approving loans. This is the fastest growing lender group in Australia.
Specialist lenders are those that target clients they are unable to get loans from the banks. They specifically have loan packages for those that may have some black marks against their credit file, may have had a bankruptcy some years back or those that have recently started their own business. Their rates will be higher since they are taking on more risk.
Who do we recommend? It entirely depends on your situation. Some customers may be buying with a cooling off period so a fast turnaround is critical, others will be looking for product features such as offset accounts, some may want to stick with a certain group of lenders, some may need special treatment of their income since they may earn commissions or be self-employed, while others just want the lowest possible rate.
It is also why having a mortgage broker is such a valuable aide to your financing needs. We have access to over 35 Australian lenders. Contact us to get started.