Breaking up with the big four

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It could be the best decision you ever make

Did you know that there are more than 100 mortgage lenders in Australia? And did you know that many of them offer superior pricing and service to the big four banks?
Many Australians automatically use one of the big four banks when they take out a home loan. Most of the time, this is because that’s where they already do their banking or where their parents got a mortgage. The big four banks are well-known brands, so they are often perceived as being the best option by default.
But the reality is that the big four banks know they don’t have to try too hard to win people’s business – and it shows in their pricing and service. Research by Roy Morgan shows that the customer satisfaction levels of the big four banks trail well behind challenger lenders.
Conversely, challenger lenders – such as online lenders – understand they need to have a competitive offering and provide a good customer experience to lure people away from the big four banks. As such, it’s no surprise that customers of challenger lenders consistently rate their experience more highly than customers of the big four.

Using a challenger lender could save you tens of thousands

Many savvy customers are ditching the big four banks in favour of alternative home loan lenders when taking out a mortgage or refinancing – and not without good reason. Choosing a challenger lender that can offer better value and service than the big four banks could save you tens of thousands of dollars over the lifetime of your loan.
Let’s look at an example of a $500,000 mortgage with a big four bank versus a challenger lender to compare the difference.
Taking out a 30-year $500,000 mortgage with a big four bank at an interest rate of 3.44% would cost you $2,229 per month and $802,264 in repayments over the life of the loan.
Alternatively, taking out a 30-year $500,000 mortgage with Well Money at an interest rate of 2.82% would cost you $2,060 per month and $741,525 over the life of the loan.
That’s an enormous saving of $169 per month and $60,739 over 30 years.

Why else would you use an alternative lender?

Aside from the potential savings on interest, choosing a challenger lender over a big four bank could see you benefit from:

  • Lower fees – Challenger lenders have a vested interest in staying as competitive as possible, so they may offer lower upfront and ongoing fees
  • Faster approval – Some challenger lenders offer smoother, faster application processes
  • More choice and flexibility – Some challenger lenders have home loan options that the big four don’t offer
  • Better service – Customers of challenger lenders rate their experience more highly than customers of the big four banks

The bottom line

Like any other major decision, it pays to do your research before choosing a lender.
Shopping around to find the right lender for a new home loan or switching to a challenger lender when refinancing could equal thousands more in your pocket – and may be the best financial decision you ever make.

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