Mortgage Broker – Established Residential Investment & Home Loan Specialist

Compare the Big 4 Banks - Refinance to a Lower Interest Rate

Compare the Big 4 Banks

 

Hello, my name is Nathan and welcome to my Compare the Big 4 Banks web page. In this article I will provide you with links to the Big 4 Banks Interest Rate pages and the difficulties faced when trying to work out what interest rate you qualify for. As a Mortgage Broker I find it hard to navigate the Big 4 Banks websites as they are for ever changing, which at a guess is why the Australian Consumer is more inclined to using Mortgage Broker services to help wade through this data.

To use my services, simply go to my Contact Us page by clicking HERE.

When you compare the big 4 banks it is no longer just the interest rate that has to be compared, there are other variables that come into the equation and the most common are:

  • Loan to Value Ratio
    • What percentage is your debt compared to the value of your property
  • Dollar Value of your Debt
    • Less than $250,000
    • $250,000 to $500,000 to $750,000
    • Greater than $750,000
  • $395 Annual Fee VS $0 Ongoing Fees
  • Product Features like:
    • Lump Sum Repayments
    • Fee Free Redraw
    • Multiple Loan Splits
    • 100% Offset Account

I will discuss the above criteria and features in further detail to ensure when you compare the big 4 banks you are comparing apples with apples.

Compare the Big 4 Banks – Loan to Value Ratio

Since the GFC (Global Financial Crisis) the big 4 banks are slowly but surely pricing their loan products in relation to risk. Back in the 70’s you couldn’t get a Home Loan unless if you had a 20% deposit and all the other buying costs like Stamp Duty, loan set up costs, Settlement Agent (Conveyancer) fees and associated costs like Council and Water Rates in advance.

Lender’s Mortgage Insurance companies entered the market place that allowed borrowers to have a smaller deposit, which enabled them to get into a property sooner rather than later but at a fee, which is normally added on top of the loan amount. Bank’s liked this because they simply passed on this Insurance Fee to the borrower and the Bank was the only one the Insurance covered.

As you can image, the less deposit, the more risky.

Therefore, the higher the Loan to Value Ratio, the greater the Lender’s Mortgage Insurance premium due to the greater risk in the event that you could no longer make the loan repayments that the Bank had to sell the property (your home) at a potential loss.

At the time of writing this article, surprisingly none of the Big 4 Bank detail on their websites that they have different pricing for higher LVR bands and yet as a Mortgage Broker I can produce a document that clearly defines different interest rates at different LVRs. I have no idea why a Big 4 Bank would not want to display their best interest rate on their website unless if they wanted to be deceitful with those consumers who unfortunately go direct to the Bank without using a Mortgage Broker.

When comparing the Big 4 Banks, my first recommendation is to find out if they have different pricing for:

  • Loan to Value Ratio (LVR) that is less than 80%
  • LVR from 80% to 90%
  • LVR from 90% to 95%

In most cases your will find if you have an LVR less than 80% you can attract a lower interest rate.

Compare the Big 4 Banks – Dollar Brackets & $395 Annual Fees

The Big 4 Banks all have what was commonly known as a Professional Package and years ago was only available to those who were in a professional white collar profession, like a Doctor for example. Their Professional Packages eventually was allowed to be accessed by any employment type but instead the Dollar Brackets were introduced. The common Dollar Brackets are:

  • Less than $250,000 – in most cases $0 discount was offered if your Home Loan was less than $250,000
  • $250,000 to $500,000 – a standard discount of 0.50% off their Standard Variable Rate
  • $500,000 to $750,000 – a standard discount of 0.60% off their Standard Variable Rate
  • Greater than $750,000 – a standard discount of 0.70% off their Standard Variable Rate

When the Big 4 Banks started moving their Interest Rates outside of the RBA’s (Reserve Bank of Australia) movements, they effectively increased their profits, which is why they all managed to increase their profits during the GFC. With over inflated Standard Variable Rate it is now not uncommon to find one of the Big 4 Banks offering up to 1.00% off their Standard Variable Rates. More on interest rates later…

When you compare the Big 4 Banks Professional Packages, you need to look up:

  • ANZ – Breakfree Home Loan Package
  • CBA – Commonwealth Bank – Wealth Package
  • NAB – Tailored Home Loan Choice Package
  • WBC – Westpac – Premier Advantage Package

They all come with a $395 Annual Fee (yet there is no collusion, they just all happen to believe on the exact same amount for their annual fee). By paying this onerous annual fee the common entitlements you receive are:

  • Discount off the Standard Variable Interest Rate
  • A Fee Free Savings Account – which many other Banks have anyway…
  • A Free Offset Account – but if you don’t ask, they don’t set this up or teach you how to use it properly
  • A Credit Card with the annual fee wavered – nothing special here seeing as there are many, many Credit Cards in the market that have $0 annual fee
  •  Discount off their affiliated Insurance Company’s Building Insurance or Loan Protection Insurance (one of the most expensive insurances and it doesn’t cover your living expenses)

The Big 4 Banks love promoting their Professional Packages and remember, they would never promote a product that doesn’t generate high profits… The added benefits for paying the $395 per year are simply not worth it when you compare to providers in the market place, so what you are actually paying for is convenience. The convenience that you can go online and look at all of your accounts on one webpage. But $395 × 30 years = $11,850 and at a guess you could easily spend $11,850 in reducing debt. For example:

  • $400,000 Home Loan @ 7% over 30 years Principal & Interest with an additional $395 repayment per year ($32.92 per month)
  • $26,832 Bank Interest Saved
  • 1 Year and 2 Months Saved off your Loan Term

Remember when you compare the Big 4 Banks that a lower interest rate with an Annual Fee may cost you more in the long run. As a Mortgage Broker I personally research the mortgage market to find lenders who have Home Loan products that have $0 monthly, $0 annual and $0 ongoing fees.

Compare the Big 4 Banks – Product Features

To really compare the big 4 banks you need to be mindful of the features you require but not just for today but into your future. Some of the main features I look for in a Home Loan product are the ability to make a lump sum payment without penalty, free redraw if required, multiple loan splits, a free 100% Offset Account and Interest Only option.

If you compare the big 4 banks basic home loan products that have $0 monthly fee or $0 annual fee you will find that they don’t come with an 100% Offset Account. This is why I preference Non-Bank lenders because they are more interested in providing a superior home loan product without any ongoing fees. My preferred lender has all of the main features described above but doesn’t charge a monthly or annual fee, saving my clients thousands over the life of the loan.

The Big 4 Banks could provide their Professional Packages with $0 ongoing fees but they choose profit over customer satisfaction, they choose to deliver ever increasing shareholder dividends instead of providing customers with fully featured products at the lowest prices, the Big 4 Banks would prefer to pay their CEO’s multi million dollar pay packets instead of providing their customers with an education how to have their money working in their favour, whereas a good Mortgage Broker will…

Compare the Big 4 Banks – Summary

I compare the Big 4 Banks on a daily basis within my role as a Mortgage Broker. I have access to ‘special rates’ compared to consumers walking off the street into a local branch and yet I can pretty much always provide a less expensive that is feature packed that comes with a lower interest rate to the majority of clients I see.

Thankfully the Big 4 Banks are constantly chasing profits and I wouldn’t be in business if they only took on board common small business ethics, that being:

  • Look after your clients as if they were family
  • Aim to get the most suitable product with minimal to no fees
  • Do the right thing and teach them how to get their money working in their favour

If you want to compare the big 4 banks with a Mortgage Broker whose ethics are inline with consumer expectations, feel free to get in touch. Simply click HERE.

Best wishes if you attempt to compare the big 4 banks.

 

Nathan Daniell
Mortgage Broker
Simplify Your Mortgage Pty Ltd
Australian Credit License Number: 387974
M: 0413 615 913
E: support@sym.net.au

P.S. I really appreciate your time to read through my Compare the Big 4 Banks webpage and I hope I have shed some light on the different criteria and features worth looking for.

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