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Little guys winning battle of the banks

Mortgage brokers are sourcing an increasing amount of their lending from regional banks, at the expense of the major banks, according to the Market Intelligence Strategy Centre (MISC).

That indicates that regional banks may be offering better deals to borrowers, and that the big four banks may need to cut their lending rates more aggressively to remain competitive. Still, between them, the big four banks control more than 80% of the home loan market.

Some of the smaller lenders offer mortgage rates around 1% lower than the major banks’ standard variable rates, although the banks do offer discounts to customers if they take up other products, like credit cards and savings accounts.

Regional banks grew their market share of all lending volumes through mortgage brokers to nearly 37% in the June quarter, up from 33% last year, according to the Market Intelligence Strategy Centre (MISC). MISC believes that there is a major structural change occurring in the broker originated mortgage market, as regional lenders such as Bank of Queensland (ASX: BOQ) and Bendigo and Adelaide Bank (ASX: BEN) become more active selling loans through brokers.

Suncorp Limited’s (ASX: SUN) decision to adopt a more competitive stance, has helped Queensland mortgage brokers source almost 40% of their business from regional lenders. Westpac Banking Corporation’s (ASX: WBC) wholly owned subsidiary, Bank of Melbourne, aggressively marketed its variable rate home loans in Victoria, resulting in regional banks claiming 36% of the broker share in that state.

A decision by the big four banks to scrap cash refunds for switching lenders, also attributed to them losing market share. Some of the smaller regional banks, credit unions and building societies still offer cash refunds to switch home loans.

Foolish takeaway

It pays to shop around when it comes to refinancing your mortgage, or taking out a new loan – don’t just pick the first loan offered by one of the big four banks. While it may look good value, a mortgage broker may be able to get you an even better rate, and save you thousands over the life of a loan.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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