Sometimes the question comes up: “are you better off getting a home loan from a bank or a non-bank?” The answer is that it doesn’t really matter as both are perfectly viable options. The key issue is shopping around to find the lender who provides the best mortgage for your circumstances.
A comparison on RateCity, for example, shows that on a loan amount of $300,000, online lender loans.com.au offers a two-year fixed home loan rate of 6.29 percent, while credit union ECU Australia has a three-year fixed home loans charging 6.35 percent.
These rates stack up very well against some of the big banks – for instance, Westpac is advertising rates of 6.89 percent on its two-year fixed home loans, and 6.79 percent for customers who lock in for three years. Similarly, ANZ has two year fixed rates of 6.54 percent, and three year rates of 6.59 percent. Even after factoring in Westpac and ANZ’s fixed rate package discounts for amounts over $150,000, the non-bank rates stack up well.
But this is not always the case, and since the first non-bank lenders hit the market in the mid-to-late 1980s, the banks have become very competitive.
How smaller institutions stack up
Another reason to consider a non-bank may be the generous inclusions some are offering first time buyers. Building society Newcastle Permanent has a range of two and three year fixed home loan packages starting at 6.39 percent, but the lender also offers a range of award winning home loans with some appealing bells and whistles. These include bonus interest on savings accounts, credit card fee waivers, and discounts on insurance products.
It can also pay to assess how non-banks measure up in terms of service and flexibility, and how they suit your particular financial circumstances. As an example, non-banks are often an option for borrowers with a poor credit rating or a chequered financial history.
But admittedly, in the wake of the global financial crisis some borrowers are still cautious about non-bank lenders. However, since 2010 all lenders are now governed by the National Consumer Credit Code, which provides strong protection for consumers. The Code ensures that credit providers disclose your rights and obligations, in the form of a written contract, during any credit arrangement such as a home loan.
With this in mind, it may be worth taking the time to compare mortgages from non-banks when it comes time for your next home loan decision.