With the mortgage market continuing to become more competitive, there are even more options available for borrowers when it comes to choosing a lender.
Australians are taking more control over their money and want to find a good home loan deal. According to research agency Sweeney, over the last six months, one in three Australians has switched financial institutions.
When the Global Financial Crisis occurred, many were uncertain about going with smaller lenders and therefore decided to go with one of the big 4 banks as they were perceived as a safer choice. However, since the GFC, non-banks have gone above and beyond expectations and are now competing against the big 4 banks to provide healthy competition in the market. The cost of living and other financial pressures have resulted in borrowers looking for alternatives to suit their budget and many have been able to find a more suitable option outside the Big 4.
Many non-banks are able to be more flexible and also offer competitively low interest rates as they are not burdened with the costs of branch networks. This flexibility also means that non-banks can keep up to date with the latest technologies and they are able to efficiently adjust their services to meet the demands of the borrower.
According to the Australian Mortgage Snapshot Study 2013, 83 per cent of Australians base their decision on interest rates when it comes to choosing a lender. As already mentioned, many smaller non-bank lenders are able to offer lower interest rates as they do not have the extra costs of maintaining an expensive branch network.
When comparing home loans, it is important for borrowers to also look at the comparison interest rate as this will give a more accurate idea of how much the loan will cost. The comparison rate also includes other fees (eg. annual fee, application fee) as well as the interest rate.
Another factor borrowers should look at when doing their research is home loan features. These are not always considered a high priority when choosing a home loan, but it is important not to discard them as they could save you a significant amount of money.
Some features that borrowers need to consider include:
Offset account: This is a separate account that is still linked to the loan, but you can use it just like any other transactional account. Also, any money that you deposit into the account will help reduce the interest that owes on the home loan.
Free redraw: Similar to the offset account, borrowers are able to deposit extra money into the account, but they can still redraw the money for other expenses, free of charge.
It is important to check if these features are free of charge or if there are fees involved as the fees could possibly outweigh the benefits. A good way to get an overview of different loans is to ask the lender for a ‘key facts sheet’. This will give you the information you need to know in an easy to read format.
Non-banks may be considered smaller players in the mortgage market; however their innovative and competitive solutions help maintain healthy competition amongst other lenders and help keep the big banks honest.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan
Anouska Linz is Manager, Online Sales at State Custodians and has over 10 years’ experience in financial services, both in broking and banking. Holding a bachelors degree in accounting, Anouska quickly discovered a love for mortgage lending and assisting people to achieve their home ownership goals. She leads a team of highly experienced lending specialists who are passionate about finding lending solutions which result in real wins for the customer. She is also a massive netball fan.
For more information on our home loans, visit www.statecustodians.com.au or call 13 72 62.