Aussie preferences switch towards smaller lenders
Investors are breaking up with the big four banks, preferring the smaller players, new research has shown.
According to Lendi, borrowers are looking for a cheaper deal, with more competitive rates being offered by the smaller banks.
With this, as rates continued to fall following the May election, preferences towards the larger institutions fell.
Lendi co-founder and managing director David Hyman said, “The cash rate cuts in the second half of this year have further fuelled the trend.”
“On average and aggregated across the three cuts, there wasn’t a huge difference between what big four banks and other lenders passed on to borrowers, but while the big banks were in the spotlight and seemingly dragging their heels.”
The median interest rate charged by the big four banks is on average 14 basis points higher than that charged by a smaller lender, Lendi found.
They also highlighted that borrowers currently sitting on the back book of non-majors are likely to be paying a higher loyalty tax than those with a big four bank.
Competition between lenders has been fierce, and if 2019 has shown us one thing, it’s that it doesn’t matter who you bank with, it’s likely you can secure a better outcome on your loan by shopping around, Mr Hyman continued.
The managing director believes things are likely to get even worse for the major lenders in the coming year.
“2020 will no doubt be another interesting year. Competition will intensify, particularly as more neobanks enter the market but also because refinancing will become easier with ASIC’s changes to responsible lending guidance and as open banking takes effect in the home loan market.”
Median interest rates (owner-occupier, P&I)
|
Settlement month |
Big 4 median rate |
Other lenders median rate |
Difference in median rates
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|
|
January |
3.87% |
3.76% |
11 bps |
|
February |
3.98% |
3.80% |
18 bps |
|
March |
3.81% |
3.76% |
5 bps |
|
April |
3.90% |
3.72% |
18 bps |
|
May |
3.82% |
3.69% |
13 bps |
|
June |
3.79% |
3.57% |
22 bps |
|
July |
3.38% |
3.24% |
14 bps |
|
August |
3.35% |
3.24% |
11 bps |
|
September |
3.35% |
3.18% |
17 bps |
|
October |
3.24% |
3.09% |
15 bps |
|
November |
3.22% |
3.07% |
15 bps
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