As a broker, I have one goal – to get the best possible financial outcome for each of my clients.
This means three things: a product that suits their circumstances (now and in the future); a loan that saves them money; and a package that allows them to enjoy the lifestyle, flexibility and benefits that are important to them.
The fact of the matter is these days, the major banks are coming up short in terms of helping me achieve these three things for my clients, as their offering is seriously lacking.
Like many other brokers, I’m finding that the smaller institutions are miles ahead of the Big 4, not only when it comes to great interest rates, fees and inclusions, but also with the stuff that money can’t buy, like fantastic customer service.
All of this might go some way to explaining why a recent survey of mortgage brokers, conducted by MyState, found that 4 out of 10 brokers have used non-major banks and regional lenders for more than half the loans they’ve written over the past 12 months.
Is the Big 4 monopoly on its way out?
For a long time, the powerful Big 4 banking institutions had a monopoly over the Australian home-lending market, and it virtually gave them license to run riot.
But in 2019, that’s no longer the case. The bigger institutions are not always forthcoming when it comes to passing on interest rate cuts, and they can be inflexible when it comes to renegotiating during the loan term as well.
The big thing they had going for them – bricks and mortar branches, where you could walk in and deal directly with a real person – are becoming a thing of the past, with more and more local branches closing their doors.
So, why do so many of us feel beholden to one of these banks, and so reluctant to make the switch to boutique banks and credit societies?
I work with clients from all kinds of backgrounds, and their family circumstances, income levels and financial goals are as unique as their fingerprints. So, I like to thing I have a pretty well-rounded perspective when it comes to these things, and I can confidently say that it is in most borrowers’ best interests to review the broader mortgage market – or they may end up paying far more than they need to.
The nostalgia of your childhood bank
One thing to keep in mind is that smaller lenders are increasingly realising how important brokers are for helping them build their customer base, so they’re very keen to throw great deals our way. They don’t have the advertising budgets of the Big 4, and they know that the average Australian can be pretty nostalgic about sticking with their first or childhood bank.
But instead of throwing up their hands in defeat, they’ve clued into the fact that they can compete with these big banks with big budgets if they work with brokers. It’s a win-win-win: the lender gets a new customer, the broker gets a happy client, and the borrower gets a better deal on their loan.
Some brokers are also reporting that clients have been coming to them with the stipulation that they absolutely don’t want to deal with the Big 4. The MyState survey reported that more than a quarter of brokers (27%) are hearing this from their customers, which is a real shift in thinking.
It could be for ethical reasons, with some of these lenders implicated in funding projects that don’t sit well with the climate-conscious. Or, it could be that the best marketing tool of all, word of mouth, is at play, with happy customers recommending these smaller lenders to their friends and family.
Whatever the reason, unless the big banks take serious action to improve their products and customer service, it’s a trend I don’t see changing any time soon. For those who are refinancing or considering a new property purchase, I’d highly recommend researching the market in collaboration with an experienced broker – your bank balance will thank you for it.
Louisa Sanghera is a Finance Broker for Residential Mortgages, Vehicle and Asset Finance, Commercial Lending and Budgeting and Cashflow Coaching with Zippy Financial.
She has gained more than 30 years in the Banking and Finance Industry, and since founding Zippy Financial, has become a multi award-nominated expert in the field of finance featuring regularly in industry press and speaking at finance and investment seminars across the country.