Mortgage matters: Do you need a loan with a big-four bank?

The big four banks are being given a run for their money, with a broad range of lenders bringing competition to the market, fostering innovation and a fair deal for buyers.

Amid the increased cost-of-living pressures, home buyers seeking a loan are considering turning to one of the more than 600 alternative lenders in search of a better deal.

What’s an alternative lender?

An alternative lender is almost always required to hold an Australian Credit Licence and operate within the guardrails of regulatory bodies, such as the Australian Securities and Investments Commission.

Alternative lenders can provide financial products like credit cards, home loans and personal loans – which often carry competitive rates, approval times and even lower fees. 

Traditional banks dominate the market, but there is a broad range of lenders, such as Liberty, making up the lending market and offering borrowers more choices when it comes to home loans.

“Buyers have more options to choose from, making it easier to secure a loan that suits their specific needs,” says Liberty communications manager Bernadine Pantarotto. “That means more opportunities to get into the market sooner and unlocking more properties to choose from.

How do they differ from the big four banks?

First-home buyers and investors are often attracted to the more flexible approach alternative lenders have, and the lower deposit thresholds compared to the big banks.

The lenders may also have faster approval processes, more personalised service and innovative loan products that better meet the unique needs of borrowers. 

“At the same time, not all borrowers tick neat boxes on loan applications when it comes to their income and financial records,” Pantarotto says.

“Alternative lenders often offer more flexible lending criteria, making it easier for self-employed people, or those with less than perfect credit histories to secure a home loan.”  

By considering alternative lenders, buyers can access tailored financial solutions that might not be available through traditional banks, potentially finding a loan that better fits their circumstances.

“Alternative lenders offer buyers greater choice, with competitive options that can cater to those who may not meet the rigid application criteria that are common with banks,” Pantarotto says. 

Benefits of flexibility 

Mortgage broker Rebecca Jarrett-Dalton agrees. The founder of Sydney mortgage broker Two Red Shoes says the majors have a great role to play, but there are policies and discounts available from a huge range of lenders.

In the last year, Two Red Shoes has worked with 33 different lenders, with 72 per cent of those in the alternative market.

“This is an overwhelming majority of buyers who are finding their perfect home with the help of a leading lender, and keeping the big guys on their competitive toes,” she says. 

Alternative lenders can offer pricing and policies that exceed those of the majors, such as fixed rates with offset accounts, lower fees, lower pricing, enhanced customer services, and dedicated environmentally friendly policies, to name but a few.

“Self-employed people can take advantage of some very flexible policies with alternative lenders that could mean a little more borrowing capacity, which translates to a more competitive offer in the property market,” Jarrett-Dalton says. 

When assessing the best lender for their circumstances, buyers should consider their priorities. This includes branch access, whether internet banking is a priority or perhaps a need for multiple offset accounts. 

The need for lenders’ mortgage insurance, business transactions or a credit card are also considerations.

“Ultimately, there’s likely a good answer to each of these, with both a bank and leading lender that could come back to a more competitive offer,” Jarrett-Dalton says.