Are some Australian home loan lenders more competitive than others?

While you could get a home loan simply by applying with your current bank, casting your net a little wider could find you dozens of a competitive offers from other banks and non-bank lenders. So which lenders are the most competitive on the market, and which of their home loan options may best suit your needs?

Banks

Traditional banks range from nation-spanning big banks to smaller local banks. As well as home loans, these banks often offer a range of a other financial services, from savings accounts and term deposits to personal loans and credit cards. The bigger banks may offer branches and ATM networks that can be accessed across the country, while some smaller lenders may focus more on providing services to their local community (though customers can still access their money elsewhere in Australia and beyond).

Mortgages from major banks aren’t always the cheapest on the market in terms of interest rates and fees. That said, they often have a variety of home loan options available to cater to borrowers in different financial situations, such as first home buyers, investors, refinancers, or self-employed. You may also be able to access various features and benefits with your home loan, and may have the option to bundle your mortgage with other financial products, which could offer improved value for you.

You can also get a mortgage from a credit union or a building society, though many of these institutions have been rebranding themselves as mutual banks and customer-owned banks in recent years. While retail banks are run to benefit their shareholders, customer-owned banks use their profits to provide financial services to their customers and otherwise serve their community.

Fintechs, neobanks and online-only lenders

Some of the newer players on the personal finance scene, these lenders operate almost entirely online, through smartphone apps, or phone banking. These fintechs may specialise solely in mortgages, and may not offer other banking services such as savings accounts, as they may not yet hold a license as an Authorised Deposit-taking Institution (ADI).

Because these lenders operate online, they have fewer overheads compared to some of the larger bank, this may allow them to offer competitive home loans, with relatively low interest rates and fees. That said, they don’t have branch networks to visit, which could be a drawback for some borrowers. Also, as specialist lenders, they may not be as flexible as some larger banks when it comes to offering home loans for different types of customers.   

Which type of mortgage lender will be best for you?

The best mortgage lender for one borrower may not be the best choice for another, as every borrower has a slightly different financial situation and goals in mind. Generally, home loans that offer more features and benefits charge higher interest rates and fees than the more basic “no-frills” home loans.

For example, a borrower who wants to pay less interest on their home loan and is happy managing their mortgage online may find that fintechs make competitive offers. However, a borrower who would prefer to keep all of their financial products in the one place, access a variety of home loan features, and have the option of visiting a branch to talk about their finances face to face, may find a big bank’s offer more competitive.

Keep in mind that you may not always need to switch lenders to get a more competitive home loan interest rate. Simply contacting your current lender and asking them to match a competing offer could be enough to get yourself a discount. You may be surprised by how flexible a lender may be willing to be to retain your business.

It's important to compare home loan before making a choice and consider which options may best suit your financial situation and personal goals, now and in the future. If you’re not sure, you could consider contacting a mortgage broker for more advice.

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