Concern over motivations for home loan lender choice

Thanks to their lack of experience, many first homebuyers make serious decisions based on one or two factors that should be taken into consideration only alongside a wide range of others.


May 26, 2010

Thanks to their lack of experience, many first homebuyers make serious decisions based on one or two factors that should be taken into consideration only alongside a wide range of others.

When home loans are discussed, interest rates are often given more weight than is sensible. Friends and family have strong opinions on the best lender and loan, with their prior experience often seen as expertise. Too often, a potential borrower doesn't shop around, believing there is little difference between lenders' loan product suites and/or that one lender is much more secure than another.

According to Mortgage Choice's Recent First Homeowners Survey*, almost one quarter (22%) of Australians base their choice of lender on the fact that it was ‘the cheapest all-round'. This means 78% did not. How much money do these borrowers waste by not looking at all the facts and figures?

Mortgage Choice spokesperson Kristy Sheppard said, “A home loan's interest rate is important but a potential borrower shouldn't look at that aspect alone before choosing a lender and loan product. Upfront, regular and switching fees should also be carefully considered as should the availability and cost of features such as offset accounts and redraw facilities. Service quality is another element.”

“Nor should a borrower base their decision solely on the fact that they do everyday banking with a lender, although this may mean they are able to contribute less of a deposit to a property purchase. The many aspects of a home loan and the term of commitment make it a vastly more complex product when compared to an everyday banking facility, hence the same lender may not be appropriate for both.

“Borrowers should also be very careful to not assume one lender offers more suitable home loans than another because it is bigger or perceived to be more secure than another. It is always a good idea to research multiple loan options from major banks through to smaller banks and non-bank lenders, building societies and credit unions.

“Just as important is being aware that the advice of those ‘nearest and dearest' cannot be compared with the guidance of an experienced, professional and ethical mortgage broker. Everyone's financial situation, lifestyle and goals are different. It is essential for borrowers to choose a lender and loan product that is tailored to their individual needs and circumstances.

“Although it is tempting to make life changing decisions based on the opinion of people closest to us, taking out a home loan is a very important financial commitment that often has ramifications if executed incorrectly. Take the time to choose wisely!”

Reasons for choosing lender: those who recently bought their first home   (multi-answer)

They were recommended to me by family, friends, broker, accountant, etc

37.1%

They offered the best interest rate at the time

33.8%

Currently have my everyday banking with them

32.9%

They were the cheapest all around interest rate, fees etc

22.2%

They were prepared to lend me the most amount of money

19.0%

They are a major lender and this security was an important factor for me

18.0%

I did not use a lender to finance my property purchase

1.4%

 

For further information, statistics or to arrange an interview, please contact:

Belinda Williamson
Mortgage Choice
02 8907 0472
belinda.williamson@mortgagechoice.com.au


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