Where Are The Best Australian Home Mortgages?
Is the Loan Market a Level Playing Field?
Over the last twenty years, the home mortgage market has become increasingly competitive. Because of the global financial crisis Australia’s major banks have garnered governmental support and in turn have increased their market shares in home mortgages. During the early 1990s, the non-banking sector brought competition to the banking industry as they were able to offer long term loans with much lower interest rates than those offered by the Australian major banks.
The Mice will Play When the Cats Away
Variable interest rate home loans through non-banking subsidiaries offered interest rates that were 2 percent lower than the variable interest rates offered by major banking institutions. For the first time in banking history, Australians were able to receive competitive interest rates from alternative interest rates.
The four major Australian banks initially left their interest rates high because they thought the non-banking sector would fizzle out. In their eyes, borrowers would be wary of taking a home mortgage from these new competitors in the home loan market. The banking industry was wrong and borrowers quickly embraced mortgages with lower interest rates from the non-banking industry. These loans saved borrowers thousands over the life of the loan.
Are Borrowers Spoiled By Choice?
Initially, non-banking lenders could only offer standard variable rate mortgage products; however, as the market evolved, lenders increased the types and features offered to home buyers across Australia. There are many options available today in the home loan market, including loan terms, variable interest rates and more.
First time home buyers love the options available, including low down payment loans. These loans allow the buyer to get into a property with a very small payment as long as the borrower has a good income. Another option is home equity loans or also known as revolving lines of credit. These loans allow borrowers to borrow against the equity in their home. The money can be used for a number of things, including home repairs, debt consolidation and more.
How do You Make the Best Choice?
Borrowers now have a variety of loans to choose from. Each of these loans can be compared by the Australian borrower. The comparison should be based on the features the loan offers as well as the interest rate.
In the past borrowers would visit a bank and apply for a loan. Once the loan was approved, the borrower would accept the terms of the loan without ever questioning if the terms were fair. Now, borrowers have so many lenders to choose from that they shop around for the best deal. This means borrowers are getting better interest rates and terms than they did in the past.
What’s the Easy Way Out?
There are now many reputable mortgage brokers that borrowers can choose from for all of their mortgage needs. Additionally, borrowers can use online mortgage comparison calculators to help them compare the different types of loans. Many homeowners are using these online calculators to determine if refinancing would be beneficial. This is especially beneficial to those who originally financed with a bank and had no choice other than the four leading banks.
The mortgage market in Australia has changed dramatically due to the financial crisis that impacted the entire world. The playing field has been evened and now borrowers have a variety of lending institutes to choose from. The Australian Federal Government has guaranteed any loans by the major banking industry at a lower cost that what is charged to second-tier banks.
The charges to these latter entities are greater, which means they are unable to compete with the interest rates offered by the major Australian banks. Until the federal government withdraws their support, the home loan market will not be equal.