Do you know about the different types of banking and lending options in Australia? Many people don’t but understanding the current landscape can help you choose a lender for your home loan that’s right for your needs.

With so much change in our banking and lending sector over the past few years, here’s what you need to know about the competition in mortgage loans.

Who provides home loans in Australia?

Major banks

Everyone is pretty familiar with Australia’s major banks. There are two kinds of major banks in Australia:

• The Big Four: Australia and New Zealand National Bank (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac.
• The not so big, major banks: St.George Bank, Bankwest, Bank of Queensland (BOQ), Bendigo Bank, Suncorp, ING, UBank, HSBC, CitiBank, Bank of Melbourne (BoM), Bank SA, and RAMS.

The Big Four banks and their subsidiaries (St, George, RAMS, BoM, Bankwest, UBank) collectively dominate the mortgage market with over 80% of market share. But they also have the worst customer satisfaction records when compared with customer-owned banks. Almost all major banks distribute their mortgages via mortgage brokers and are run for profit for their shareholders.

Customer-owned banks

With so many issues related to major banks, many people have been turning to the customer-owned banking sector — more than 4 million Australians use customer-owned banks. There are about 80 customer-owned banks across all over Australia, and they often sit under different umbrella terms such as:

• Mutual Banks
• Credit Unions
• Building Societies

Some of the most popular customer-owned banks include: Credit Union Australia (CUA), Gateway Credit Union, Community First Credit Union, Bank Australia, Beyond Bank, Teachers’ Mutual Bank, Heritage Bank, Australian Military Bank, and IMBank.

Customer-owned banks are strong and safe alternatives to the big banks. These banks are big on giving back to the community to help them grow — profits are generally reinvested into communities whereas big banks distribute profits to their shareholders.

Non-banking lenders

Non-banking lenders such as Pepper Money, Bluestone, Liberty, and La Trobe, are all specialised mortgage lenders. Sometimes, due to unplanned life events, borrowers could have their creditworthiness decline from ‘prime’ to what bankers call ‘sub-prime’. In these cases, non-banking lenders can provide support. Non-banking lenders are still regulated and need to follow responsible lending guidelines.

Why you should check out the competition in home loans

It’s always a good idea to compare home loan rates that are out in the market, especially if:

• Your financial situation is good, in that you have proven income (declared to the ATO) and savings history
• You’re not overly leveraged or in too much debt
• You have a good credit history, in that you have no paid or unpaid defaults and haven’t missed any payments

You could find yourself a competitive home loan rate that is better suited to your current and future needs, has exceptional customer service, and will save you money in the long run.

Remember, when borrowing money for a property, banks are simply giving you money. A mortgage is not something you wear like an accessory, so you don’t need to go to the biggest bank. Be sure to check out the competition, because you may find a better loan elsewhere.

SOURCE - Gabriel Mikha - The Finance Co
IMAGE - FreePix