Although the Big Four banks have the largest reputation in Australia, they don't necessarily have the most competitive rates. Here's how the compare with the lowest rates and average rates.
| Australian interest rates April 2024 | Data |
|---|---|
| Average variable mortgage interest rate | 7.26% |
| Lowest variable rate on Finder's database | 5.69% |
| Average fixed mortgage interest rate | 6.86% |
| Lowest fixed rate on Finder's database | 5.48% |
*Lowest rates listed above are based on owner occupier products in Finder's database with LVRs of at least 80%.
Australia has 4 main banking giants and they account for roughly 75% of all mortgages in the country.
The Big Four are the largest players in Australia's home loan market by far. To understand just how large their share of the market is, here's a snapshot of the latest APRA data showing the value of owner occupier and investor loans held by the Big Four and some of their closest competitors.
This table shows the value of home loans "on the books" at each lender. Even the smallest of the Big Four holds more than three times more mortgages in dollar terms than the next smallest competitor.
A home loan from one of the Big Four doesn't necessarily offer anything different to any other home loan lender. Features such as extra repayments, redraw facilities and offset accounts are common.
But there are a couple of areas where the bigger banks might have more of a focus.
While by no means exclusive to the largest banks, the Big Four often advertise their premium package loans. These products let you bundle a home loan with a credit card, bank account (which functions as an offset account) and other products. These days, the big banks often have the most competitive offers on their package loans and may offer a cashback if you switch to them from another lender.
And that's a big part of why banks do package loans. They want all your business, not just your mortgage.
Again, not exclusive to the Big Four, but these banks frequently offer these two types of products. Basic home loans have low variable rates (usually) but don't have offset accounts. Introductory rate loans offer a very low (usually variable) rate for an initial period, but increase later.
Mortgage lending in Australia is a thriving, crowded industry, with lenders big and small looking to lend you money. So it's always worth comparing a wide range of home loans. Alternatives to the major lenders include:
Lenders in the categories above often overlap. A small bank could be entirely online, while credit unions may have limited physical branches and a strong online service. And some banks are starting to use the technology of the fintechs.
You might not know this, but the nation's biggest institutions own or are associated with the following financial brands:
There are plenty of reasons borrowers stick with NAB, ANZ, Westpac or the Commonwealth Bank:
In most respects the Big Four are as good as any other lender. But depending on what you're looking for, you might be better served with one of their smaller competitors. Here are a few reasons why:
Not necessarily. All of Australia's Big Four are Authorised Deposit-Taking Institution (ADI). But so are almost all the smaller banks, credit unions and digital banks. You can find more detailed informations here.
In the unlikely event your lender goes bankrupt, it won't affect your ownership of the property as your loan account would pass to a new institution, who bought the assets of your now-defunct lender.
The only lenders who might not be covered by the bank guarantee scheme are very small neobanks, which are essentially financial start-ups. Most of these companies obtain a banking license or partner with someone who has one, and is an ADI. .
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