5-Star Your Mortgage Lenders

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“For a complex transaction like a home loan, the ability to keep things as simple and friction-free as possible certainly separates the wheat from the chaff”

 

“Other challenges we have seen is a significant rise in hardship cases. This, in turn, has created an increased need for flexible lending policies”

 

The property market is booming, and as home buyers rush to buy, there is a huge uptick in Australians borrowing to buy houses - recent ABS figures indicate that the number of home loans being issued jumped by 10.5% in January.

 

And with a surge in borrowers, there is also increased competition from lenders for mortgage business. “The competition among lenders for refinancing borrowers will also remain fierce, which is great news for savvy homeowners looking to reduce their monthly repayments, access the equity in their home, or own their home sooner,” CEO of homeloans.com.au Scott McWilliam said.

 

However, with countless home-loan products on offer just what should a borrower look out for when choosing the best mortgage?

 

The service proposition offered is what sets a lender apart in a competitive market, McWilliam notes.

 

“Small yet significant details like the ease of application, approval turnaround times, and the overall customer service experience, not just pre-settlement, but throughout the entire life of the loan,” he said. “For a complex transaction like a home loan, the ability to keep things as simple and friction-free as possible certainly separates the wheat from the chaff.”

 

But it’s not just home buyers – a rise in homeowners looking to reverse mortgage or release equity from their homes has meant that lenders like Heartland Reverse Mortgages are also seeing keen interest in their mortgage products according to head of operations Sharon Yardley.

 

Yardley says the growing demand for equity release products could be further amplified as loan deferrals expire and repayments start catching up with customers.

 

“If [a borrower is] in or about to enter retirement, they may choose to switch to a financial product that does not require monthly loan repayments such as a reverse mortgage,” Yardley proposes.

 

“At Heartland we believe that what sets you apart from another [lender] is doing the right thing by the customer, which is why we place such emphasis on our duty of care with our reverse mortgage.”

 

A lender’s flexibility and their product features “is an important differentiator as everyone’s needs in retirement are different, and they also change as you age,” she adds.

 

2020 didn’t run short of disruptions. Businesses were propelled to rely on already widely adopted video communication platforms with a new urgency that would continue to pave the future in how property is transacted.  

 

For La Trobe Financial, who had introduced a remote loan writing technology before the lockdowns began, the focus continues to remain on allowing for a more streamlined home loan process – from the initial lodgement of the application, all the way through to settlement day.  

 

“Non-bank financial institutions (NBFIs) such as La Trobe Financial are ideally suited to providing credit to credit-worthy applicants appropriately throughout this period, thanks to the custom nature of our credit assessments and willingness to take the time to fully understand their unique position, and provide an appropriate tailored solution to meet their objectives and requirements,” says La Trobe Financial Head of Origination Channels Chris Meaker.  

 

A broad product range, a flexible and customised assessment methodology, as well as a deep experience in working through challenges such as Covid has raised the lender’s importance to borrowers during recent times, Meaker explains. 

 

Not every borrower is able to get any mortgage – and to support self-employed borrowers into the property market, Better Choice has introduced a new construction home loan product with features added flexibility, including a reduction to the starting rate once the building works are completed.

 

 

What is most important when choosing a lender?

We contacted thousands of borrowers and mortgage brokers to find out just what matters when choosing a home loan, and the results of our research are clear- quick response times, low rates, and an all-rounded customer experience determine the star performers from the list of lenders in the market today.

 

So how much does each attribute matter to Australian mortgage borrowers and mortgage professionals?

 

Processing and Approval

Your Mortgage’s research reveals that processing and approval speed is the most important consideration when choosing a lender. The market is moving fast and borrowers and mortgage brokers alike see this as a key attribute – delays can mean the loss of a home purchase: 91% of people surveyed rated the processing and approval speed of a home loan application as important or most important when choosing. And in this key attribute both BNK Bank and AMP were mentioned numerous times for their efficiency and speed.

 

Interest Rates

If processing and approval speed is most importance, then a lender’s rate is the next vital consideration ­– 83% of respondents rated a lender’s interest rate as important or most important. And that’s not surprising – a great mortgage interest rate can shave thousands off the total cost of a loan. In this category mortgage lenders like Better Choice and Macquarie Bank were recognised for providing both a great fixed rate and variable rate. homeloans.com.au also received one of the highest ratings for the best variable rate.

 

Customer Service

It’s no surprise that the service that a lender provides can make all the difference to how a borrower feels about their home loan provider. Our readers, survey respondents and mortgage professional all rated customer service highly, with 70% saying that great customer service was important or most important when choosing a mortgage lender.

 

Fees

It’s all very well to just focus on a mortgage rate, but home loans can often have added fees and costs – so it’s important to check and understand just how they will affect borrowers. But how important is it to borrowers or their advisers? In fact, it’s front-of-mind for just over half of respondents – 53% rated fees as important or most important. Bluestone in particular was recognised for their low fees for first-time buyers.

 

Online Banking

Despite the heightening reliance on technology during COVID-19 and the appeal that comes with being able to have immediate control over household economics, online banking was the fifth most important factor for our respondents – just 30% said their online mortgage experience was important or most important.

 

 

Prime features to consider when choosing a mortgage product

There’s a myriad of features and add-ons that can come bundled with a home loan product. Knowing how each of these components work, and what each lender can offer, can make a real difference to monthly repayments and provide flexibility.

 

An Offset Account

An offset account is ideally a savings account except that it is connected to your home loan. Any money you keep in that account is taken off the amount you owe – so if you have $30k in there, you’ll be paying interest on $30,000 less.

 

How does this work in practice? If the outstanding home loan amount is $300,000, and the lender’s rate is 4%, but there’s also an offset account that holds a balance of $30,000 – then the interest rate would only apply to $270,000 of the loan. This framework will lower monthly repayments, and in the long run potentially save a small fortune in total costs. In addition, the balance of an offset account can be accessed whenever it’s needed.

 

If you are really disciplined you can get your salary paid into your account, then use your credit card for all your bills until the date when you have to pay off your credit card balance to avoid interest payments. That means your entire salary has counted against your loan. But again you need to be really disciplined – start paying interest on the credit card amount and you’ll be paying much more interest than on your mortgage.

 

When exploring options for an offset account across the different lenders, it’s important to be aware of any high account keeping fees, as well as the difference between having 100% offset and partial offset.

 

A Redraw Facility

For borrowers who have the financial capacity to lodge additional repayments each month, this can gradually build up over time as extra cash that can be withdrawn from the mortgage.

 

While it sounds like the feature works like an offset account in terms of its accessibility to extra funds, the two are very different, with a redraw facility generally being subject to withdrawal fees, as well as restrictions on the withdrawal amount and the number of times a borrower can extract funds.

 

A redraw facility is ideal for borrowers who are wanting to pay down the principal portion of their loan faster, and simultaneously lower their monthly interest payments – but still be able to access the funds in future.

 

Fixed-rate home loan

Knowing whether to settle into a fixed rate home loan or one with a variable rate could save on costs while also providing some stability. While a variable interest rate can expose a borrower to market fluctuations – meaning that if the cash rate rises, so does the monthly mortgage repayment – freezing a mortgage into a fixed rate can offer secure budgeting because each repayment will remain uniform and refrain from increasing if interest rates tick upwards.

 

The lenders who were recognised by our research for providing a competitive fixed rate mortgage product include Adelaide Bank, Macquarie Bank, ING, NAB, Better Choice, Commonwealth Bank (CBA), and Auswide.

 

With the low interest rates currently circulating the market, it could be a good opportunity to opt into a fixed rate. However, when choosing to do this, it’s important to keep in mind that in the event that the cash rate takes a further dip, the mortgage will already be fixed to a specific rate and be unable to take advantage of an even lower one.

 

If a variable rate is what you’re looking for, then the lenders our readers recognised for providing the best variable rate home loan products include Macquarie Bank, ING, Firstmac, Resimac, Better Choice, and Adelaide Bank.

 

Front runners for every home loan customer

 

The first-time buyer

Entering the property market can often be overwhelming if it hasn’t been done before. In addition to understanding the terminology and processes that come with buying a home, becoming accustomed to how a home loan fundamentally operates – the additional costs, fees, and what to be aware of – can be confusing.

But that doesn’t always have to be the case for first time borrowers, especially if they connect with a mortgage broker or a lender who provides support to property newbies.

 

The lenders recognised for having exceptional home loan products for first-time buyers include Commonwealth Bank (CBA), NAB, St. George, Macquarie Bank, Firstmac, ING, and Suncorp.

 

The home-loan refinancer

Refinancing can often feel like starting again. When making the move to refinance a home loan, whether it’s to obtain a lower interest rate or switch to a more competitive lender, it’s important to work with a mortgage broker or lender who can provide guidance throughout the refinancing process, including the documentation that’s required and the total costs to expect.

 

The lenders recognised as top performers for refinancing include Macquarie Bank, St. George, Firstmac, Commonwealth Bank (CBA), ING, and Suncor

 

 

The Best Mortgage Lenders

Your Mortgage’s Mortgage of the Year Awards enters its 25th anniversary in celebrating the lenders that have outstanding product offerings and customer service, as well as competitive rates and low fees.

 

The awards provide borrowers insight into the lenders that home loan customers and mortgage brokers choose to work with, offering invaluable industry insight that can assist in the selection of a lender.

  • Adelaide Bank
  • ANZ
  • Auswide
  • Bankwest
  • CBA
  • Citibank
  • E Money
  • FirstMac
  • ING
  • Liberty
  • Macquarie Bank
  • ME Bank
  • Mortgage Ezy
  • NAB
  • Pepper
  • St. George
  • Suncorp
 

Winners By Category

Fixed Rate

BEST VARIABLE RATE

REVERSE MORTGAGE

1st TIME BUYER

LOW DOC

REEFINACING

EQUITY RELEASE

INVESTOR

Adelaide Bank

Macquarie Bank

Heartland

CBA

Better Choice

Macquarie

Macquarie Bank

Macquarie Bank

Macquarie Bank

ING

 

NAB

Pepper 

St George

Bankwest

FirstMac

ING

FirstMac 

 

St. George

La Trobe

First Mac

First Mac

homeloans.com.au

NAB

homeloans.com.au

 

Macquarie Bank

homeloans.com.au

CBA

ING

ANZ

Better Choice

Better Choice 

 

First Mac

Liberty

ING

ME Bank 

Adelaide bank

CBA

Adelaide bank

 

ING

E Money

Suncorp

 

CBA

Auswide

   

Suncorp

Mortgage Ezy

   

Citibank

             

Better Choice

HOW WE CHOOSE THE BEST

‘Leading lender’ is a phrase many lending companies like to use when describing their mortgage products. Now 21 companies can claim that title on the back of robust market research from home loan customers and mortgage brokers. To select the best mortgage lenders for 2021, Your Mortgage enlisted some of the industry’s top experts.

 

Throughout a 12-week process our research team conducted one-on-one interviews with home owners and mortgage brokers to understand just what mattered when choosing a mortgage lender.

 

Customers rated home loans across a range of criteria, including offset and redraw facilities, portability, add-ons, customer service, processing times, fees, and online banking.

 

Mortgage brokers were then asked what features they thought were most important from a home loan lender, and then asked how they rated across these attributes.

 

Lenders that achieved more than 80% overall scores were awarded five-stars for that particular category. A five-star product is recognised as a loan with an outstanding combination of price, features, and customer service.