Many brokers work a lot with the Big Four banks and most consumers are happy to go with the popular option but there are benefits to choosing a smaller bank or non-bank lender.
Lenders outside the Big Four are a legitimate alternative in the market and worthy of consideration in every broker proposal. During the time around 2008 when the economy was less stable, consumers shifted away from smaller lenders and moved to the Big Four banks in an effort to minimise exposure and risk. Since this time, there has been a retreat away from the Big Four and back to the smaller lenders.
Most lenders these days are competing on interest rates and consumers often have a mind-set to only shop around for the best rate. A lender offering the lowest rate may not necessarily have the most suitable product. Brokers should always have both the client’s short-term and long-term goals in mind when evaluating possible solutions. Some clients, for example, may be willing to accept paying a few dollars more in order to have access to a branch in their suburb which is open at convenient hours for them.
All lenders have preferences for different geographic locations and brokers can use this to their advantage. A client looking for a property in Newcastle or the Central Coast for example would likely be suited to the local non-bank lender, Newcastle Permanent.
Smaller lenders, like many smaller organisations, can also offer stronger service and faster turnaround times as they process fewer loans than Big Four lenders. At 1st Street, our brokers have found the pre-settlement and post-settlement support is at very high levels with smaller lenders which keeps clients happy throughout the loan process and beyond.
Overheads can be high amongst the Big 4 as they have large offices to maintain and expenditure such as high marketing budgets. Smaller lenders can operate with lower overheads and any savings can be passed on directly to consumers, making their rates competitive.
Innovative products, such as a fixed loan with an offset account, are common amongst smaller lenders as these lenders are more agile and flexible in their approach to the market. Lenders outside the Big 4 also have niche policies which brokers can work with to give applications their best chance. It is worthwhile identifying the small policy differences between lenders that can have large implications for clients.
Ultimately the smaller lenders won’t replace the Big 4 but having them in the market is good for competition which is good for the consumer. Many smaller lenders have proven themselves over the years in their policy, service and rate, and brokers should keep them in mind as a true alternative to the Big Four.
Jeremy Fisher, director and founder, 1st Street Home Loans
Jeremy Fisher is one of the most awarded mortgage brokers in the industry and winner of the Australian Broker Association’s prestigious ‘Australian Broker of the Year’. Since 2001, Jeremy has settled in excess of $750 million worth of property loans and delighted clients with exceptional results and highly personalised service.
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