Majors provide lowest-value mortgages despite market dominance

Canstar’s Home Loans Star Ratings 2018 report, which analysed 5,394 property loans from 126 lenders, found that, in line with other market research, smaller lenders offer more competitive prices than the big four banks.

Of the 5,300-plus loans that were evaluated, more than 40 per cent, or 2,202, failed to meet the financial services comparison site’s eligibility criteria.

Further, of the loans that were found to be eligible (3,192), just 10 per cent received a five-star rating, according to Canstar.

The big four banks were largely absent from the top 10 per cent, with National Australia Bank, which was the only major bank to keep its interest rate on hold recently, receiving a single five-star rating in the category of investment fixed home loans.

The other major banks did not receive five-star ratings in any of the categories, which include home lender, variable home lender, fixed home lender, investment home lender, investment variable home lender, investment fixed home lender and line of credit.

The Productivity Commission’s report on competition in the Australian financial system, which was handed to the government on 29 July, argued that the major banks have “sustained prices above competition levels, offered inferior-quality products to some groups of customers, subsumed much of the broker industry and taken action that would inhibit the expansion of smaller competitors in some markets”.

With three of the big four banks recently hiking rates by 14 to 16 basis points out of cycle following a series of rises by non-major lenders — including Macquarie Bank, AMP, ING, Bank of Queensland, Heritage Bank and Auswide Bank — Canstar’s group executive of financial services, Steve Mickenbecker, said that further increases can be expected, especially in response to swelling wholesale funding costs.

“The pressure will be flowing through to the profit margins and eventually most are likely to follow with rate hikes,” Mr Mickenbecker said.

“Whether you choose to move lenders or not, it’s a good time to consider fixing your loan’s interest rate to future-proof repayments for two or three years while they are manageable.”

An earlier study by Nielsen reinforced the finding that discontent among consumers towards their financial services providers has been growing steadily against the backdrop of the ongoing royal commission, with more than 3.1 million Australians expressing dissatisfaction with their main financial institution, of which 2 million are looking to switch providers in the upcoming months.

Canstar’s annual mortgage ratings survey revealed that the best-value home loans are provided by smaller institutions.

The financial services comparison site identified the top lenders, based on value, in every category in alphabetical order.

Outstanding Value: Home Lender

• Bank Australia
• Freedom Lend
• Gateway Bank
• Greater Bank
• Homestar Finance
• HSBC
• ING
• Newcastle Permanent
• Qudos Bank
• RACQ

Outstanding Value: Variable Home Lender

• AMO Group
• Bank of Melbourne
• BankSA
• Easy Street Financial Services
• Freedom Lend
• Homestar Finance
• HSBC
• loans.com.au
• Pacific Mortgage Group
• Reduce Home Loans

Outstanding Value: Fixed Home Lender

• Easy Street Financial Services
• Freedom Lend
• Greater Bank
• HSBC
• ING
• Newcastle Permanent
• Qudos Bank
• RACQ Bank
• Teachers Mutual Bank
• UBank
• UniBank

Outstanding Value: Investment Home Lender

• AMO Group
• Freedom Lend
• Homestar Finance
• Newcastle Permanent
• RACQ Bank
• TicToc Home Loans
• Virgin Money

Outstanding Value: Investment Variable Home Lender

• AMO Group
• Freedom Lend
• Homestar Finance
• loans.com.au
• Pacific Mortgage Group
• RACQ Bank
• Reduce Home Loans
• State Custodians

Outstanding Value: Investment Fixed Home Lender

• Freedom Lend
• Greater Bank
• Homestar Finance
• NAB
• Newcastle Permanent
• Police Bank
• RACQ Bank
• TicToc Home Loans
• UBank
• Virgin Money

Outstanding Value: Line of Credit

• Aussie
• BankVic
• Greater Bank
• State Custodians
• Suncorp Bank

[Related: Consumer confidence rocked by rate hikes]