Australian financial institutions include banks, credit unions and building societies, as well as non-bank lenders. All these financial groups offer home loans. But, they are very different to each other in other ways.
Australian banks, including the ‘Big Four’ – ANZ, CommBank, NAB and Westpac – are the major lenders in the mortgage market. In fact, according to data, the CommBank and Westpac hold some 50% of Australian home loans.
Most Australian banks are well-established. Plus, they offer a wide range of financial products such as credit cards, savings accounts and mortgages.
The advantages of using a bank are:
- This type of financial institution offers a range of lending products to suit a variety of situations.
- Added security, with banks adhering to the Consumer Credit Code and regulated by the Australian Prudential regulation Authority (APRA).
However, banks may not offer the most affordable options when it comes to home loans. Therefore, it pays to shop around and compare lenders. You may also find that you don’t receive a personalised customer service from a bank. So, if you’re seeking better service, then you may wish to look elsewhere.
While building societies and credit unions are very different to banks, these fall under bank lenders. This classification applies to these institutions as they are Authorised Deposit-taking Institutions regulated by APRA. So, how are they different to banks?
These lending institutions are:
- Share based rather than publicly-listed – Run to generate a profit for shareholders, credit unions and building societies are member-orientated. So, rather than passing out profits to shareholders, these financial institutions pass their profits on to members. These offers often include better interest rates and lower fees.
- Member orientated – With a customer ownership structure, building societies and credit unions require membership before you can take out a loan. Some building societies and credit unions charge a fee for membership, while others don’t. So, be sure to ask about charges before signing-up.
- More personalised – Offering a broad range of home loan products, building societies and credit unions have competitive rates. Plus, their service is more customer-centric with reduced fees.
Non-banks lenders are those without a banking license. These lenders offer home loans, but don’t fall under the same classification as banks, credit unions and building societies. Other differences include:
- Private ownership – Non-bank lenders have private ownership. Therefore, they offer competitive interest rates and fees in comparison to larger lenders.
- Security – While APRA regulates banks, the Australian Investments Commission (ASIC) regulates non-bank lenders. Plus, they must also abide by the Consumer Credit Code. So, while these are different regulators to that of banks it is still safe to borrow from non-bank lenders.
- Lending criteria – Due to ASIC regulating non-bank lenders, they have simpler lending criteria. Thus, it is easier to get a home loan with these lenders.
- Tailored loans – With a different lending criterion comes a broader selection of home loan choices. These home loans can be personalised to meet specific requirements with niche-market loans.
To find the right home loan for you, compare various lending groups to each other. Look at bank, building society and credit union loans, as well as non-bank loans. Compare interest rates, features, fees and customer services. Then, decide which fits your needs the best. Just remember that cheapest is not always ideal. Also, make sure you look at your needs and circumstances.
Do you want to know more about bank, building society, credit union and non-bank home loans? Then contact eChoice, we can help you find out if you’re eligible. Our brokers also have access to 100’s of home loan products. So, we’ll find the right mortgage for you.