Why Borrowers Are Turning Away From The Big Banks

Borrowers have turned away from the big four banks in 2019 in favour of small lenders with more competitive rates, according to new data from an online mortgage broker.

The proportion of borrowers opting to go with the big banks has plummeted in the past six months, an analysis of owner-occupied principal and interest loans by online-broking platform Lendi has revealed.

Only 24 per cent of borrowers using the platform went with one of the big four between January and June, down from 30 per cent in 2018.

Over the same period, the big four charged more interest than other lenders while rates fell across the board; the big four reduced rates by half as much as the rest of the 37 lenders on Lendi’s panel.

The median interest rate for all lenders on the platform was 3.64 per cent in June. This was down from a median of 3.81 per cent in January – a drop of 17 basis points.

The big four dropped rates by only eight basis points and even increased rates during February, the month the banking royal commission’s final report was released.

The median rate charged by the big four in June was 3.79 per cent, 22 basis points higher than the median rate charged by the rest of the lenders. This was the biggest gulf between the big four and other lenders over the six-month period.

‘Shattered trust’ driving exodus

It’s not just better rates coaxing customers towards less established lenders, according to Lendi managing director David Hyman.

“The royal commission shattered trust in the big institutions,” he said. “Now, we are seeing more borrowers opting to go with less established or newer brands because savings are winning out over brand loyalty.”

“More digital lenders are entering the market and offering highly competitive loan packages.”

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