When you’re looking for a home loan deal, you’ll probably think first of approaching one of the Big Four Aussie banks – NAB, ANZ, Westpac or Commonwealth Bank. If you already have an account with one of the Big Four – Commonwealth, for example – then you might just look to them for your home loan as well. You’re familiar with each other and you might get a preferential rate or an easier application process, right? Well, yes, if you live in the 1950’s and you apply for a loan by putting on your Sunday best and making an appointment to see the local bank manager. But today in 2019, no you probably won’t get a better deal for being a long-term bank customer. Loyalty doesn’t count for a lot in the loan market these days. Either way, it pays to look elsewhere for good mortgage deals because there are plenty of other banks and lenders with better interest rates than the Commonwealth Bank of Australia. At the moment, the Commonwealth Bank’s fixed home loan rates start at 3.79 per cent (comparison rate 4.87 per cent) for two-year fixed loans. Commonwealth’s variable rates start at 4.62 per cent pa (comparison rate 5.02 per cent). A 0.70 percentage point discount applies if you take out a Wealth package loan deal. Commonwealth’s standard variable rate is 5.12 per cent (comparison rate 5.27 per cent). There are some advantages to sticking with a bigger bank It’s true that the Big Four dominate the mortgage market, but this is partly because customers often stay in their safe zone and with their familiar provider. There are other reasons too, so before you set off to look for another mortgage provider, it’s worth taking stock of what you’ll gain by staying with the mainstream banks. Widespread service and more convenience As you can imagine, the Big Four have the widest coverage in Australia when it comes to physical branches and ATMs. If these aspects of banking matter to you, then this level of convenience and accessibility is a big plus. A more comprehensive range of financial products Bigger banks and lenders have more variety when it comes to accounts, loans and mortgages than lots of smaller providers do. Bigger banks offer the feeling of stability Or, at least, people feel safer and more stable. Even the smallest lenders are regulated by the Australian Securities and Investments Commission (ASIC) so you’re just as covered with a relatively unknown provider as you are with CBA, but you might just want that extra assurance of the name. Better customer service. The larger banks also have larger customer service departments and they’re often available for more hours and days of the week than those of the smaller providers. You might also find that they have specialist departments for people immigrating to Australia, which may be more important to you than low rate home loans. These downsides may prompt you to look away from the mainstream. Although you might feel safer and that your money is more secure with one of the Big Four, there are a few downsides that come with following a well-beaten path. Higher interest rates. Simply because the Big Four have so many devotees, they can afford to be less–than–competitive with their interest rates. They know that a lot of their custom will follow on naturally from people opening transaction and savings accounts with them, so they don’t have to try too hard to attract them. However, finding a deal that’s just 0.5 per cent cheaper can make a huge difference over the life of a mortgage. Fewer options for “non–conforming” borrowers If you’re self-employed or you have a patchy credit record then the bigger banks might not have many – or any – options for you. Again, this is because they have enough “conforming” applicants to keep them happy. I’m looking beyond the Big Four – what can I get? There’s one thing for sure and that’s when it comes to home loans Australia has a bustling mortgage market with providers of all sizes looking for customers. If the bigger lenders aren’t the best fit for you, or if you’re looking for a cheaper deal, then there’s lots of different options. Online home loan providers If you’re OK with doing everything online or on the phone, then an online lender may well suit you. The applications are easy to go through and you’ll usually find that online providers have the lowest interest rate. Ubank’s UHomeLoan, for example, has a variable and comparison rate of 3.34 per cent. Use a non-bank lender Try a credit union, a building society or another non-banking institution if you’re looking for lower rates. Make sure that the lender is regulated by the government, though, to be on the safe side. Athena’s Owner Occupier Principal & interest (Refinance) loan is charging a rate of 3.09 per cent pa (comparison rate 3.05 per cent). Try a smaller bank There are smaller state or regional banks looking to find a foothold in the mortgage market by appealing to non-conforming and savvy borrowers. Some of these smaller banks are owned by one of the Big Four, but they operate under their own rules, so you get the flexibility and the security. Beyond Bank has a Special Low Rate Variable Home Loan rate of 3.64 per cent (comparison rate is also 3.64 per cent) Fintech and neobank providers If you’re not shy of new financial technologies then one of the many non-bank lenders could be ideal (and cheaper) for you; the Reduce Low Rider home loan has an interest rate of 2.89 per cent, for example. Reduce Home Loans says a Commonwealth Bank Wealth Package Variable Home Loan (Principal and Interest) customer currently paying of a $420,000 owner-occupier 30 year loan can save $143,000 by switching to the Low Rider. Are the smaller banks and lenders safe? Yes, all registered financial institutions, no matter their size, are regulated by APRA, the Australian Prudential Regulation Authority and ASIC, the Australian Securities and Investments Commission. They all have to hold a minimum amount of capital so that they can provide a certain amount of funds to customers and absorb any losses. The risk is actually on the lender, not you While your home loan is almost certainly the biggest financial commitment you’ll ever make, the risk actually falls mostly on the lender. You might think that you’re more secure with one of the bigger lenders, but in actual fact you’re equally safe and protected with lenders of all sizes, as long as they’re registered. If your lender folds, you’ll still have your mortgage, you’d just be paying it to whichever institution took over your old one. However, if you stop paying your mortgage, then the lender has the hassle and worry of chasing you up. Compare home loans from Australia’s banks, credit unions and non-bank lenders at InfoChoice. Home loan comparison rate is based on a secured loan of $150,000 and a term of 25 years. WARNING: These comparison rates apply only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and costs savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. InfoChoice does not compare all providers and products in the market. We may have a commercial relationship with some of the providers. Please read Important Information about how we make money, the products we compare and other important information about our service. The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.