Competition is a marvellous facet of the Australian home loans market, and it’s got to the stage, where it seems like there’s literally a home loan lender on every street corner. While competition is an outcome worth celebrating, as it usually leads to cheaper home loans, you’ll need to do plenty of homework to make the right choice.
That said the reality is that the majority of ‘banks’ and ‘non-bank lenders’, such as the ‘credit unions’ and ‘building societies’ provide perfectly effective home loans. The challenge for the consumer is to hunt around for the right home loan lender, who provides the best home loan for their situation.
A bank home loan lender will generally provide a wide selection of home loans and flexibility. With this in mind, home loans from the banks can often prove more expensive.
The banks argue they are forced to impose relatively higher fees and charges because they offer superior product flexibility and extra services that are delivered through vast branch systems. Maintaining expensive shop fronts, customer service representatives, and so on, is an expensive business, and these costs are ultimately passed onto the home loan customer.
Non bank lenders – credit unions and building societies:
For those new to the concept of a non-bank home loan lender, a credit union is a cooperative where members are customers and shareholders. They’re not-for-profit organisations, and as a consequence regularly offer some very reasonable home loans in terms of interest rates and fees.
On the other hand, building societies are more like banks, as they get their funding mostly from customer deposits, and indeed some of Australia’s most famous banking brands have started life as a building society.
Distinct from banks, credit unions and building societies are smaller in size and need to compete harder on price to win over new customers.
It can also pay to assess how a non-bank home loan lender measures up in terms of service and flexibility, and how they suit your particular financial circumstances.