Beyond the big four
There are alternatives to the big four
So many of us love to hate the major banks, but like a long-term relationship that we find difficult to break, we continue to stick to them.
The big four banks have approximately 84% of the mortgage market and we still choose these banks, even those borrowers who had tried to resist, thanks to post-financial crisis takeovers.
There are the regional banks and customer-owned organisations hoping that the dominance of the big four will come under scrutiny by the financial inquiry system soon.
However, in the meantime if you are ready to look elsewhere, there are alternatives which we will discuss. Of course, with each alternative, you will need to consider your circumstances and undertake some further due diligence to meet your needs before proceeding.
Peer-to-peer lending (P2P) has recently entered the Australian market.
It is one of the UK’s fastest-growing alternatives in the finance market, which has expanded from almost nothing before the financial crisis to lend out close to £1 billion (Financial Times, June 2014).
Many of the P2P services are automated, the intermediary companies can operate with lower overheads and can provide the service more cheaply than traditional financial institutions, so that borrowers may be able to borrow money at lower interest rates and lenders may be able to earn higher returns. Compared to stock markets, P2P lending tends to have both less volatility and less liquidity.
Customer-owned organisations –10 mutual banks, 7 building societies and 83 credit unions – are promoting far better rates and conditions than the major banks. Why? They don’t have to satisfy external shareholders. As customer-owned organisations, their focus is to deliver value to their customers.
Christine Long mentions in her article (The Age, 14 May 2014) that the major Banks’ main focus is on profitability for their shareholders where as customer-owned organisations focuses on profitability within sensible limits. Christine Long states in her article that you would be $200-$300 better off if you’re with a mutual organisation than with one of the major four banks.
The “Community Banks” were introduced in 1998, when the major Banks were closing branches. Each branch is locally owned and operated. Each branch keeps a share of the profits and ploughs it back into the community. Christine Long mentions that a Community Bank in Mount Waverley took three years to achieve the required financial support to open its branch. Twelve years later and it has become a $145 million business with 3,000 customers and an old-school approach to banking. Since opening, it has given $644,000 to community projects, including $110,000 last financial year.
Another Alternative – La Trobe Financial
La Trobe Financial has been in the mortgage industry for over 60 years. Today, it is one of Australia’s leading bank independent credit specialists and has distribution capacity located throughout Australia with average annual asset origination volumes circa A$2 billion.
We are focused on residential and commercial assets. We offer credit and investment solutions for prime and alternate income verification consumers that mainstream providers don’t accommodate. Referrers gain direct access to our front line senior credit decision makers to make the path to settlement easy and clear. Our product criteria are the most understandable in the market, combined with fast service and a fair and reliable commission structure with no clawbacks.
Our success has been built in three core principles.
First, that residential and commercial property remains the central form of personal wealth creation and the base from which thousands of businesses like La Trobe Financial are founded each year. By providing finance to under-serviced borrowers, we are assisting many Australians achieve access to financial independence and freedom.
Secondly, that we have been specialising in this asset class for over 60 years and we are one of the most successful mortgage funds in Australia. Our Fund did not freeze during the global financial crisis and has only become stronger and stronger in continuing our focus in this asset class.
Thirdly, that we do not want to be “all things to all people”. That we stick to what we know best and deliver superior service. And when it comes to a credit specialist team, we have an experienced team that will deliver personal and immediate service. We always look to improve and deliver the best outcomes for our customers. The benefits to our customers is to give even better service, faster turnaround times and improved capabilities.