Product ranking - Basic variable mortgages

First time buyers, investors and second or third home buyers who are looking for a simple product that meets their needs often opt for a basic variable loan.

These products don’t come with bells and whistles, such as offset or transactional accounts, and are the cheapest of all the mortgage products on the market.

In recent months, basic variable loans have become even more competitively priced as Australia’s majors, second tiers and non-bank lenders wage a war for market share.

In addition, with the government’s deferred establishment fee ban now in effect, each of the lenders ranked has become more competitive on fees and charges.

To analyse the results, The Adviser once again called on its broker panel and data analyst partner Pisces to rate and rank Australia’s leading basic variable mortgage products from the major and second-tier lenders.

In developing the ranking, Pisces applied a process that considered not only the product specifics – such as interest rates, discharge fees and other quantitative measures – but also the perception of brokers themselves, including their thoughts on servicing times and overall policy.

The seven basic variable mortgages under review were:

• AMP – Basic Variable Loan

• ANZ – Simplicity Plus

• Bankwest – Super Start Home Loan

• CBA – 3yr Rate Saver Home Loan

• Homeside – HomePlus Home Loan

• ING DIRECT – Mortgage Simplifier

• Macquarie – Classic

Macquarie was the standout performer this year – an excellent achievement considering the bank was not even operating in this space 12 months ago.

However, Macquarie Bank has for a long time been a firm favourite with brokers and borrowers alike.

The bank performed strongly in the various broker perception categories, placing first in broker service, ease of dealing with lenders and customer service.

While the lender also managed to perform well across all of the product metrics, it was its popularity with brokers that ultimately helped Macquarie to claim top position overall.

ANZ also performed well in broker perception but failed to hit the mark in product metrics, causing the major to slip to fourth place overall.

CBA was another standout performer in terms both of broker perception and product metrics.

The major took out first place overall in product metrics, having achieved the number one position in credit policy and LMI fees.

CBA’s failure to impress brokers, however, meant the bank slipped to second place overall.

A WORD FROM OUR ANALYST….

Pisces’ business manager Sandra Nguyen said market demand had forced all of Australia’s lenders to become more competitive on rates, fees and features.

Ms Nguyen said the product ranking’s comparison analysis revealed lenders are trying to make their basic products more appealing by adding introductory rates, discounts on rates (depending on the loan amount) and incorporating additional features to their ‘no frills’ product.

“Results show that it is more affordable to have a basic product with the introductory rate, considering it is common for homebuyers to refinance their home loan every five to seven years,” she said. “Therefore, the basic introductory rate offers customers a more affordable option, especially as there are no more early discharge fees.”