More than one in three recent homebuyers (33.8%) based their decision on interest rate alone when choosing a lender while many would also borrow from the bank they do their banking with.
A recent survey by Mortgage Choice found that a number of recent first homebuyers also placed too much weight on the fact that the lender was prepared to lend them the most amount of money (19%), that they were a major lender and therefore perceived to be more secure (18%), and that the borrower did their current everyday banking with the lender (32.9%).
“A home loan’s interest rate is important, but a potential borrower shouldn’t look at that aspect alone before choosing a lender and loan product,” said Mortgage Choice spokesperson Kristy Sheppard. “Upfront, regular and switching fees should also be carefully considered, as should the availability and cost of features such as offset accounts and redraw facilities. Service quality is another element.”
“Borrowers should also be very careful to not assume one lender offers more suitable home loans than another because it’s bigger or perceived to be more secure than another. It’s always a good idea to research multiple loan options from major banks through to smaller banks and non-bank lenders, building societies and credit unions,” advised Sheppard.
“Nor should a borrower base their decision solely on the fact that they do everyday banking with a lender, although this may mean they’re able to contribute less of a deposit to a property purchase. The many aspects of a home loan and the term of commitment make it a vastly more complex product when compared to an everyday banking facility; hence the same lender may not be appropriate for both.”