Australian borrowers are making big savings by securing finance with smaller lenders, according to the recently released Lendi Home Loan Report.

The report highlights that homeowners who settled with a non-big four lender in 2019 have signed up to loans with median interest rates between five and 22 basis points lower than borrowers settling with a big four bank.  

At a glance:

• Australian borrowers are making big savings by securing finance with smaller lenders, according to the recently released Lendi Home Loan Report.
• The analysis also shows the proportion of refinancers choosing a big four bank has fallen from 26% in 2018 to just 19% over the six months to June 2019.
• Homeowners refinancing their P&I loans settled with a new median interest rate of 3.76%.  This represents an average interest rate reduction of 56 basis points through refinancing. The average time taken by lenders to assess an application was 10.86 days for the big four banks and 9.58 days for other lenders.

The analysis also shows the proportion of refinancers choosing a big four bank has fallen from 26% in 2018 to just 19% over the six months to June 2019. 

“The appeal of smaller lenders is growing as they consistently undercut the big four to offer median rates that are up to 22 basis points lower than the big banks," said Lendi co-founder and Managing Director, David Hyman.

“The Royal Commission shattered trust in the big institutions and now we are seeing more borrowers opting to go with less established or newer brands because savings are winning out over brand loyalty.”

Analysing more than 2,000 owner-occupier home loans settled between January and June 2019, the reported indicated that across the panel of 37 lenders, the median interest rate charged to owner-occupiers repaying P&I ranged from between 3.81% for loans settled in January and 3.64% for those settled in June. 

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Source: Lendi

Additionally, over the period, homeowners refinancing their P&I loans settled with a new median interest rate of 3.76%.  This represents an average interest rate reduction of 56 basis points through refinancing. The average time taken by lenders to assess an application was 10.86 days for the big four banks and 9.58 days for other lenders.

The RBA cuts to the official cash rate have had an immediate effect on refinancing but not new purchase activity, as Lendi recorded an increase of 52% in the number of borrowers coming to the platform to refinance in June compared to May this year.

The report also showed that the median interest rate secured by borrowers for loans submitted since June 4 is 3.65% with the big four banks and 3.45% with the smaller (non-big four) lenders.

“Within hours of the June RBA announcement, refinance activity picked up. The July cut has seen this momentum continue as homeowners look to reduce their monthly repayments," said Mr Hyman.

“The cost of living is a serious issue for thousands of Australian households and what we’ve seen since the RBA cuts is borrowers looking to ease the pressure rather than take on more debt.”

Find the full Lendi Home Loan Report here.

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