Borrowers are flocking to smaller banks and mortgage lenders, which are stealing market share away from the major banks, new research has found.
One-in-six residential home loans in Australia are now financed with non-major lenders, according to a RateCity analysis of Australian Prudential Regulation Authority data.
Alex Parsons, CEO of RateCity.com.au, said aggressive competition, incentives and discounted rates have helped the non-major lenders gradually increase market share.
“Although the major banks still hold the lion’s share of the home loan market, that’s slowly shifting as more people realise that smaller lenders, in the most part, offer better rates – often with the service to match,” he said.
“People are getting smarter with their home loans and realising that paying the higher rates is a waste of their money.
“As cost of living pressures bite, making a few tweaks to your home loan or refinancing into a lower rate can save upwards of $1000 a year on a typical $300,000 mortgage – where else can you find savings like that in your budget?”
RateCity shows that some mortgage providers are now offering rates as low as 4.55 percent for variable loans and 4.29 percent for a one-year fixed term. This compares with the average of the big four banks’ basic variable rates at 5.24 percent (or 5.04 percent with package discounts).
In dollar terms refinancing a $300,000, 25-year home loan from the majors (5.04%) into the lower variable rate (4.55%) would cut monthly repayments by $85, slashing the interest bill by $1020 in the first year. If you kept the repayments at the higher level, you would pay off your home loan more than 2 years earlier and save yourself almost $20,000 interest.
“There’s a lot to be gained from comparing rates and refinancing the home loan and more Australians are realising it’s something they should get onto right away.”
In support of this, new data from Sweeny Research, commissioned by RateCity, revealed that 55 percent of Australians researched interest rates in the past 6 months. One third researched switching financial institutions in that time, it found.
“Saving money was the key driver behind people’s decision to research rates and switch. So if your lender isn’t offering you a home loan rate with a 4 in front of it, then don’t get mad, get switching!”