Hi All,
My partner and I are looking to buy our first home together and we're looking at some of the non big 4 banks as they are offering some amazing rates (looking for a variable with offset loan).
I was wondering what the Ozbargain community thought of the smaller banks vs the big banks?
What has been your experience with your home loan provider?
What made you choose them (other than interest rate)?
Thanks
you get around…
The primary difference is on customer experience, especially as it relates to internet banking, apps, etc. Smaller outfits simply don't have the money to invest in this like the majors do. For example, I recently took out a savings account with a smaller (but still very well known) bank and this aspect was like going back to the '90s.
Then you get to the potential risks. There are two risks you needs to be aware of in borrowing money from smaller outfits.
You may get a better interest rate, and may even keep that for the life of your loan. But, smaller outfits are more susceptible to funding squeezes when they arise from time to time. This can cause your interest rate to get jacked up quickly in response to these funding costs getting passed on. We saw this in the 2008 - 2010 period and it caused a lot of pain for some borrowers.
Offset accounts. Remember that money in an offset is treated as a deposit. It is not a loan repayment that is available for withdrawal. Therefore, if the bank goes bust, any money in your offset account is at risk. Yes, they will be covered by the deposit guarantee (assuming you have borrowed from an ADI), but that is (a) untested and (b) likely to be a protracted process. A deposit with any bank is at risk, but for somewhat obvious reasons, smaller outfits have a higher risk profile than majors in this regard.
I thought all banks were ADI.
No all home loan providers are though…
Correct. All banks are ADIs, but not all lenders. Depending upon what you're doing, it's important to understand precisely what you're getting involved in.
I recently moved my savings to BOQ. Switched for the interest rate, but having access to a branch was also a nice bonus. But their app is soooooooo bad.
Have a look at some of the tier 2 banks like Macquarie. Good customer service and great apps. But smaller than big 4 so you don’t feel like a number. Good rates too.
I’ve been with CBA, UBank, BankWest, BOM, and NAB, and they’re all the same