Aussie preferences switch towards smaller lenders

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December 16 2019
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Investors are breaking up with the big four banks, preferring the smaller players, new research has suggested.

Aussie preferences switch towards smaller lenders

According to Lendi, borrowers are looking for a cheaper deal, with more competitive rates being offered by the smaller banks.

With this, as rates continued to fall following the May election, preferences towards the larger institutions fell.

Lendi co-founder and managing director David Hyman said, “The cash rate cuts in the second half of this year have further fuelled the trend.”

“On average and aggregated across the three cuts, there wasn’t a huge difference between what big four banks and other lenders passed on to borrowers, but while the big banks were in the spotlight and seemingly dragging their heels.”

The median interest rate charged by the big four banks is on average 14 basis points higher than that charged by a smaller lender, Lendi found.

They also highlight borrowers currently sitting on the back book of non-big four lenders are likely to be paying a higher loyalty tax than those with a big four bank.

Competition between lenders has been fierce, and if 2019 has shown us one thing, it’s that it doesn’t matter who you bank with, it’s likely you can secure a better outcome on your loan by shopping around, Mr Hyman continued.

The managing director believes things are likely to get even worse for the major lenders in the coming year.

“2020 will no doubt be another interesting year. Competition will intensify, particularly as more neobanks enter the market, but also because refinancing will become easier with ASIC’s changes to responsible lending guidance and as open banking takes effect in the home loan market.”

Median interest rates (owner-occupier, P&I)

Settlement month	Big 4 median rate	Other lenders’ median rate	Difference in median rates
January	3.87%	3.76%	11 bps
February	3.98%	3.80%	18 bps
March	3.81%	3.76%	5 bps
April	3.90%	3.72%	18 bps
May	3.82%	3.69%	13 bps
June	3.79%	3.57%	22 bps
July	3.38%	3.24%	14 bps
August	3.35%	3.24%	11 bps
September	3.35%	3.18%	17 bps
October	3.24%	3.09%	15 bps
November	3.22%	3.07%	15 bps

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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