Home buyers and mortgage holders can save hundreds of dollars per month by abandoning the big four banks and using smaller lenders, a mortgage broker says.
Property owners are being urged to shop around for savings of up to one per cent, with mortgage broker the Loan Market Group saying the margin between the standard variable rates offered by banks and other low variable rates had returned to 2007 levels.
Consumer advocacy group Choice cautions borrowers to carefully examine the fine print with exit fees and on ongoing fees, while financial research firm Canstar Cannex says discounts are readily available from major banks.
Loan Market Group chief operating officer Dean Rushton said it was now possible to obtain low variable from non-bank lenders.
“With the latest Reserve Bank of Australia (RBA) rate rise and bank movements outside of the rates, it’s now possible to get variable rates at up to one per cent below the bank’s standard variable rates,” Mr Rushton said.
“There are variable rates out there that are well below the major banks and in some cases consumers would be better off looking for one of these deals.”
The Loan Market Group says a one per cent variance translates to more than $200 in monthly savings on a $350,000 loan at a 25-year term.
Choice spokesman Christopher Zinn said Westpac’s move to raise its rates by 0.45 per cent in response to the RBA’s 0.25 per cent December rate hike had opened up a gap in retail banking.
“It put switching back on the agenda and the building societies and mutuals have claims that they have attractive offers,” Mr Zinn said.
He said the non-bank lenders provided alternatives, but they did not have the massive marketing budgets and presence of the big four banks.
“I wouldn’t make a blanket announcement that small lenders are always better all of the time. It really depends on you and your circumstances,” he said.
“When it comes to exit fees it is sometimes the non-banks that do have higher exit fees, so people really need to check that out.”
He said mortgage brokers did not always have access to the best deals and it paid to shop around and use reputable comparison websites.
Canstar Cannex senior analyst Harry Senlitonga said the comparisons were not always clear cut, with major banks all offering discounted variable home loan rates.
“The majority of the banks will have a minimum loan requirement before you are eligible for the package,” he said.
“Typically you will get up to a 0.7 per cent discount when you borrow $250,000 or more.”
Some banks also offered lower discounts on fixed rates.
He said there was now a range of different options following a series of recent interest rate movements.
“Often the cheapest variable rate 12 months ago might not be the cheapest today.”