Hi,
Any opinion on why to choose any of the big 4 banks compared to non-bank lenders?
Why would I choose a non-bank lender beside the interest rate as a basis?
As a result of the GFC, it is best to choose a stable entity rather than those 'smaller type' of lender? Can you give your opinion?
Thanks,
jach
Non-bank lenders
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
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Re: Non-bank lenders
Hi Jach,
That is an interesting question. Firstly many of the securitised non bank lenders are actually owned and or funded by our major banks, so in effect for these lenders there is very little difference.
The non-banks that are not funded by the major banks have access to government funds which have allowed them to undercut the majors. FirstMac for example is one of the cheapest lenders for people borrowing less than 80% of the property value and who have stable employment and a clear credit history.
The smaller banks, building societies and credit unions are in varying positions. Adelaide & Bendigo Bank used to do some pretty risky lending and as a result their rates are higher now. However other building societies such as The Rock, Heritage Building Society and some credit unions have rates (in particular for fixed rate loans) well below those of the majors.
The major banks are each funded in different ways and this also results in significant pricing differences between the majors. One of the main reasons why Westpac merged with St George is because there were concerns over the way St George was funded. The major banks have in the last 6 months differed significantly in pricing, in particular for the "unpublished" discounts that they offer to their best customers (borrowing >$1m).
The appetite for risk between the banks has also changed with CBA taking the most commonsense approach to lending while St George's policy has changed to mirror those of Westpac. Accross the board all lenders are making fewer exceptions to policy and are "cherry picking", which is where they know that funding loans is difficult so they only pick and choose the best loans to approve.
The other major impact is that few major lenders are still offering low doc loans without BAS statements. We expect this type of lending will go back to being the domain of the non-bank lenders as it was 10 years ago.
Personally my opinion is that there is a very high risk that the major banks will capitalise on their dominance (more so) and increase rates by more than the reserve bank with coming rate rises. The other lenders will follow the lead of the majors however many of them will likely be cheaper.
The #1 concern for most people at the moment when getting a loan is the time required to get the approval. The majors are finding it very difficult to cope with the volumes being processed and as a result many people who are buying a property end up missing out because their loan isn't approved in time.
It is never as simple as saying that one lender or type of lender is the be all end all. It is very much a matter of horses for courses, and the smaller lenders in good financial positions are without a doubt a viable alternative to the major banks.
That is an interesting question. Firstly many of the securitised non bank lenders are actually owned and or funded by our major banks, so in effect for these lenders there is very little difference.
The non-banks that are not funded by the major banks have access to government funds which have allowed them to undercut the majors. FirstMac for example is one of the cheapest lenders for people borrowing less than 80% of the property value and who have stable employment and a clear credit history.
The smaller banks, building societies and credit unions are in varying positions. Adelaide & Bendigo Bank used to do some pretty risky lending and as a result their rates are higher now. However other building societies such as The Rock, Heritage Building Society and some credit unions have rates (in particular for fixed rate loans) well below those of the majors.
The major banks are each funded in different ways and this also results in significant pricing differences between the majors. One of the main reasons why Westpac merged with St George is because there were concerns over the way St George was funded. The major banks have in the last 6 months differed significantly in pricing, in particular for the "unpublished" discounts that they offer to their best customers (borrowing >$1m).
The appetite for risk between the banks has also changed with CBA taking the most commonsense approach to lending while St George's policy has changed to mirror those of Westpac. Accross the board all lenders are making fewer exceptions to policy and are "cherry picking", which is where they know that funding loans is difficult so they only pick and choose the best loans to approve.
The other major impact is that few major lenders are still offering low doc loans without BAS statements. We expect this type of lending will go back to being the domain of the non-bank lenders as it was 10 years ago.
Personally my opinion is that there is a very high risk that the major banks will capitalise on their dominance (more so) and increase rates by more than the reserve bank with coming rate rises. The other lenders will follow the lead of the majors however many of them will likely be cheaper.
The #1 concern for most people at the moment when getting a loan is the time required to get the approval. The majors are finding it very difficult to cope with the volumes being processed and as a result many people who are buying a property end up missing out because their loan isn't approved in time.
It is never as simple as saying that one lender or type of lender is the be all end all. It is very much a matter of horses for courses, and the smaller lenders in good financial positions are without a doubt a viable alternative to the major banks.