Four in five home loan borrowers in Australia have missed out on thousands of savings by choosing big banks over online lenders, according to one expert.
Steve Jovcevski, property investment and lending expert at finance blog Mozo, told News.com.au that first homebuyers taking up a $400,000 home loan for a 30-year term can save as much as $18,011 by picking the most affordable offering by online lenders. According to industry data, the cheapest rate offered by an online lender was 3.67%, lower than the most affordable rate from a big bank at 3.89%.
"Consumers at the moment are pretty cash-strapped; more than ever, people are looking to save," he said.
Jovcevski said the "trust factor" has something to do with the trend — borrowers are more confident in dealing with big banks despite having to bear additional costs.
"There’s the fear that something will go wrong, and that’s why the banks continue to hold a lot of the market," he said.
Realestate.com.au home loans expert Andrew Russell had the same view, adding that while low-interest rates might attract some borrowers, others are still inclined to make their transactions with banks they are familiar with.
In fact, data show that almost half of borrowers are looking at cheaper online lenders. However, the majority still end up choosing big banks.
Russell said the current tightening of lending rules by banks has created an opportunity for other lenders to get the attention of would-be borrowers.
"It’s great to see competition in the market and it’s great to see the second- and third-tier banks thinking about what customer needs aren’t being met," he told News.com.au.