SPECIAL REPORT
5-STAR
MORTGAGE LENDERS Your Mortgage research reveals the Australian lenders that borrowers and brokers rate most highly
SPECIAL REPORT
5-STAR MORTGAGE LENDERS
5-STAR AWARDS:
AUSTRALIA’S BEST HOME LOAN LENDERS THE PROPERTY MARKET is booming, and as homebuyers rush to buy, there has been a huge uptick in Australian borrowers applying for mortgages. Recent ABS figures indicate that the number of home loans issued jumped by 10.5% in January of this year. With a surge in borrowers, there is also increased competition among lenders for mortgage business. “The competition among lenders for refinancing borrowers will also remain fierce, which is great news for savvy homeowners looking to reduce their monthly repayments, access the equity in their home, or own their home sooner,” says homeloans.com.au CEO Scott McWilliam.
“For a complex transaction like a home loan, the ability to keep things as simple and friction-free as possible certainly separates the wheat from the chaff ” Scott McWilliam, CEO, homeloans.com.au However, with countless home loan products on offer, just what should a borrower look out for when choosing the best mortgage? The service proposition offered is what sets a lender apart in a competitive market, McWilliam says: “small yet significant details like ease of application, approval turnaround times and the overall customer service experience, not just pre-settlement but throughout the entire life of the loan”. “For a complex transaction like a home loan, the ability to keep things as simple and friction-free as possible certainly separates the wheat from the chaff,” he says. But it’s not just homebuyers – a rise in homeowners looking for reverse mortgages or to release equity from their homes has meant that lenders like Heartland Seniors Finance are also seeing keen interest in their mortgage products, according to head of operations Sharon Yardley. Yardley says the growing demand for equity release products could
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be further amplified as loan deferrals expire and repayments start catching up with customers. “If [a borrower is] in or about to enter retirement, they may choose to switch to a financial product that does not require monthly loan repayments, such as a reverse mortgage,” Yardley says. “At Heartland we believe that what sets you apart from another [lender] is doing the right thing by the customer, which is why we place such emphasis on our duty of care with our reverse mortgage.” A lender’s flexibility and its product features are “an important differentiator as everyone’s needs in retirement are different, and they also change as you age”, Yardley adds. Not every borrower is able to get any mortgage – and to support self-employed applicants in getting into the property market, Better Choice has introduced a new construction home loan product that features added flexibility, including a reduction to the starting rate once the building works are completed.
HOW WE CHOOSE THE BEST “Leading lender” is a phrase many companies like to use when describing their mortgage products. Now, 21 Australian lenders can claim that title based on the results of robust market research by Your Mortgage. To select the best mortgage lenders for 2021, we enlisted some of the industry’s top experts. During a 12-week process, the research team conducted one-on-one interviews with homeowners and mortgage brokers in order to find out just what mattered to them when choosing a mortgage lender. Customers rated home loans across a range of criteria, including offset and redraw facilities, portability, add-ons, customer service, processing times, fees and online banking. Mortgage brokers were then asked which features provided by a home loan lender were most important, and they also rated these attributes. Lenders that achieved overall scores of more than 80% were awarded five stars for that particular category. A five-star product is recognised as a loan with an outstanding combination of price, features and customer service.
What is most important when choosing a lender? Your Mortgage contacted thousands of borrowers and mortgage brokers to find out just what matters to them when choosing a home loan, and the results of the research are clear: quick response times, low rates and overall customer experience determine the star performers among the list of lenders in the market today. So, how much does each attribute matter to Australian home loan borrowers and mortgage professionals? Processing and approval Research by Your Mortgage reveals that processing and approval speed is the most important consideration when choosing a lender. The market is moving fast, and borrowers and mortgage brokers alike see speed as a key attribute – delays can mean the loss of a home purchase. Ninety-one per cent of respondents rated the processing and approval speed of a home loan application as important or most important when choosing a lender. And when it came to this key attribute both BNK Bank and AMP were mentioned numerous times for their efficiency and speed.
“What sets you apart from another [lender] is doing the right thing by the customer, which is why we place such emphasis on our duty of care” Sharon Yardley, head of operations, Heartland Seniors Finance
Interest rates If processing and approval speed is most important, then a lender’s interest rate is the next vital consideration: 8 3% of respondents rated a lender’s interest rate as important or most important. And that’s not surprising – a great mortgage interest rate can shave thousands off the
HOW IMPORTANT ARE THE FOLLOWING TO YOU? Very important
Important
Neutral
Unimportant
Very unimportant
Processing and approval speed
Customer service
Fees
Rates
Online banking
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
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SPECIAL REPORT
5-STAR MORTGAGE LENDERS
total cost of a loan. In this category, mortgage lenders like Better Choice and Macquarie Bank were recognised for providing great fixed as well as variable rates. Homeloans.com.au also received one of the highest scores for best variable interest rate. Customer service It’s no surprise that the service a lender provides can make all the difference to how a borrower feels about their home loan provider. Our readers, survey respondents and mortgage professionals all rated customer service highly, with 70% saying that great customer service was important or most important when choosing a mortgage lender. Fees It’s all very well to just focus on the mortgage rate, but home loans can often have added fees and costs, so it’s important to check and understand just how they will affect borrowers. But how important are they to borrowers and their advisers? In fact, it’s front of mind for just over half of respondents: 53% rated fees as important or most important. Bluestone in particular was recognised for its low fees for first-time buyers.
NUMBER OF WINNERS BY CATEGORY
Fixed rate
Low-doc 7
7
Refinancing
Variable rate 6
Reverse mortgage
6
Equity release 1
Investor
First-time buyer 7
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Online banking Despite the heightening reliance on technology during COVID-19 and the appeal of being able to have immediate control over your household economics, online banking was the fifth most important factor for the survey respondents: just 30% said their online mortgage experience was important or most important.
Prime features to consider when choosing a mortgage product There are a myriad of features and add-ons that can come bundled with a home loan product. Knowing how each of these components works, and what each lender can offer, can make a real difference to monthly repayments and provide flexibility. Offset account An offset account is ideally a savings account, except that it is connected to your home loan. Any money you keep in that account is taken off the amount you owe, so if you have $30k in there, you’ll be paying interest on $30,000 less. How does this work in practice? If the outstanding home loan amount is $300,000 and the lender’s rate is 4%, but there’s also an offset account that holds a balance of $30,000, then the mortgage interest rate would only apply to $270,000 of the loan. This framework lowers monthly repayments and in the long run can potentially save the borrower a small fortune in total costs. In addition, the balance of an offset account can be accessed whenever it’s needed. If you are really disciplined you can get your salary paid into your account, then use your credit card for all your bills until the date when you have to pay off your credit card balance to avoid interest payments. That means your entire salary has counted against your loan. But again you need to be careful about making your credit card repayments on time: if you start paying interest on the credit card amount, you’ll be paying much more interest than on your mortgage. When exploring options for an offset account across the different lenders, it’s important that borrowers should be aware of any high account-keeping fees, as well as the difference between having 100% offset and partial offset. Redraw facility For borrowers who have the financial capacity to lodge additional repayments each month, these can gradually build up over time as extra cash that can be withdrawn from the mortgage. While it sounds like the feature works like an offset account in terms of the accessibility to extra funds, the two are very different. A redraw facility is generally subject to withdrawal fees, and there may be restrictions on the withdrawal amount and the number of times a borrower can extract funds. A redraw facility is ideal for borrowers who want to pay down the principal portion of their loan faster, and to simultaneously lower
their monthly interest payments but still be able to access the funds in the future. Fixed rate home loan Knowing whether to settle for a fixed rate home loan or one with a variable rate could save on costs while also providing some stability. While a variable interest rate can expose a borrower to market fluctuations – meaning that if the cash rate rises, so does the monthly mortgage repayment – freezing a mortgage into a fixed rate can offer secure budgeting because repayments will remain the same and not increase if interest rates tick upwards. The lenders that were recognised by Your Mortgage’s research for providing a competitive fixed rate mortgage product include Adelaide Bank, Macquarie Bank, ING, NAB, Better Choice, Commonwealth Bank and Auswide. With the low interest rates currently circulating the market, now could be a good time for borrowers to opt for a fixed rate. However, when choosing to do this, it’s important to keep in mind that in the event that the cash rate takes a further dip, the mortgage will already be fixed at a specific rate and you will be unable to take advantage of an even lower one. If a variable rate is what you’re looking for, then the lenders that survey respondents recognised for having the best variable rate home loan products include Macquarie Bank, ING, Homeloans.com.au, Firstmac, Better Choice and Adelaide Bank.
Frontrunners for home loan customers The first-time buyer Entering the property market for the first time can be overwhelming. In addition to understanding the terminology and processes that come with buying a home, as well as how a home loan fundamentally operates – the additional costs, fees and what to be aware of – can be confusing. But that doesn’t always have to be the case for first-time borrowers, especially if they connect with a mortgage broker or a lender that provides support to property newbies. The lenders recognised for having exceptional home loan products for first-time buyers include Commonwealth Bank, NAB, St. George, Macquarie Bank, Firstmac, ING and Suncorp. The home loan refinancer Refinancing can often feel like starting again. When making the move to refinance a home loan, whether to obtain a lower interest rate or switch to a more competitive lender, it’s important to work with a mortgage broker or lender that can provide guidance throughout the refinancing process, including the documentation that’s required and the total costs to expect. The lenders recognised as top performers in refinancing include Macquarie Bank, St. George, Firstmac, Commonwealth Bank, ING and Suncorp.
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SPECIAL REPORT
5-STAR MORTGAGE LENDERS FIXED RATE
VARIABLE RATE
5-STAR AWARD WINNERS
5-STAR AWARD WINNERS
Better Choice
ING
Better Choice
ING
Adelaide Bank
Macquarie Bank
Homeloans.com.au
Macquarie Bank
Auswide
NAB
Adelaide Bank Firstmac
CBA
REVERSE MORTGAGE
FIRST-TIME BUYER
5-STAR AWARD WINNERS
5-STAR AWARD WINNERS
Heartland
CBA
NAB
Firstmac
St. George
ING
Suncorp
Macquarie Bank
LOW-DOC
REFINANCING
5-STAR AWARD WINNERS
5-STAR AWARD WINNERS
Better Choice
Liberty
CBA
St. George
Homeloans.com.au
Mortgage Ezy
Firstmac
Suncorp
La Trobe Financial
Pepper
ING
emoney
EQUITY RELEASE
INVESTOR
5-STAR AWARD WINNERS
5-STAR AWARD WINNERS Homeloans.com.au
Citibank
Firstmac
Adelaide Bank
Firstmac
ING
ANZ
Macquarie Bank
Macquarie Bank
CBA
Bankwest
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Macquarie Bank
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ME Bank
SUMMARY: 5-STAR AWARD WINNERS BY CATEGORY Fixed rate
Variable rate
Reverse mortgage
First-time buyer
Low-doc
Refinancing
Equity release
Investor
Adelaide Bank ANZ Auswide Bankwest Better Choice CBA Citibank emoney Firstmac Heartland Homeloans.com.au ING La Trobe Financial Liberty Macquarie Bank ME Bank Mortgage Ezy NAB Pepper St. George Suncorp
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