Home loans: Is 2021 the year of the online lender?

Family unpacking boxes in new home.

Quick facts from our research:

  • Aussies are looking for better home loan deals, with 62% of borrowers considering online lenders rather than the big banks.
  • On average, borrowers could save $4,024 a year by switching from the big four banks to an online lender.
  • Not knowing enough about online lenders, wanting face-to-face discussions and remaining loyal are the main reasons borrowers gave for staying put.
  • 35% also trust their mortgage broker to recommend the cheapest rates, despite many online lenders removing brokers from the equation.

Comparing costs: Big banks vs online lenders

The big question is do online lenders stack up?

While big banks still make up the lion's share of mortgages, a growing number of Australians are seeking cheaper home loan rates elsewhere, with online lenders snapping up savvy borrowers looking to save.

In fact, in a recent survey of 1,226 Australians conducted by Mozo, almost two-thirds (62%) said they would consider an online lender instead of a big bank.

Among those surveyed, 55% said cheaper rates were the most appealing factor, followed by lower fees (54%), easy applications (32%), and faster approval times (29%).

Considering different lenders makes sense. While the average variable rate among lenders we track currently sits at 3.28% p.a. (and 3.57% p.a. among the big four banks), Mozo analysis found that borrowers stood to access rates up to 129 basis points lower if they shopped around.

At the time of writing, the most competitive variable rate in our database is 1.99% p.a. (1.99% p.a. comparison rate*), offered by 2021 Mozo Experts Choice Award winner Reduce Home Loans.

If the average big four bank customer paying off a $400,000 loan were to switch to this rate, they could potentially save $4,024 a year in repayments.

“With thousands of dollars to be shaved off your mortgage each year, it's hard to see why borrowers wouldn’t bank a better rate through an online lender,” says Mozo spokesperson Tom Godfrey.

Mortgage mire: What’s holding borrowers back?

Despite the low rates available elsewhere, many borrowers stick with their bank out of loyalty, a preference for face-to-face service, and a lack of information about alternatives.

Almost a quarter of borrowers surveyed by Mozo (23%) also said they would choose a bank over an online lender if their mortgage broker advised them to.

Of course, different borrowers have different priorities when picking out a loan, and price will often be weighed against other factors like features and convenience. But the influence of brokers can’t be underestimated. 

Among those surveyed who used a mortgage broker, 31% said it saves them the hassle of searching for competitive rates, while 28% said it takes the stress out of completing the application process.

Make sure to do your research

While mortgage brokers may be the first port of call for many Australians looking to purchase property, home loan customers who rely exclusively on them could be missing out on much cheaper deals.

Over a third of respondents (35%) said one of the main reasons they used a mortgage broker was to access the lowest interest rates. 

But some of the most attractive variable rates come from online lenders that refrain from using brokerage services. These include:

  • Well Home Loans, currently offering 2.17% p.a. (2.20% p.a. comparison rate*)
  • Athena, currently offering 2.29% p.a. (2.23% p.a. comparison rate*)
  • Yard, currently offering 2.29% p.a. (2.32% p.a. comparison rate*)
  • UBank, currently offering 2.34% p.a. (2.34% p.a. comparison rate*)
  • loans.com.au, currently offering 2.48% p.a. (2.50% p.a. comparison rate*)

“While it’s understandable some borrowers might seek to engage additional help when trying to navigate complex refinancing situations, for many borrowers access to a better interest rate is at their fingertips,” said Godfrey.

To get an idea of the rates currently available, visit our home loan comparison page or browse the selection below. And for a look at some quality options, check out the winners list in this year’s Mozo Experts Choice Awards.“

Home loan comparisons on Mozo - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 2021
    Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.variable for 24 months and then 2.25% p.a. variable
    2.21% p.a.
    Go to site
    Details
  • placeholder
    UHomeLoan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.
    fixed 3 years
    2.24% p.a.
    Go to site
    Details
  • placeholder
    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 3 years
    2.32% p.a.
    Go to site
    Details
  • placeholder
    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.
    Go to site
    Details
  • placeholder
    Variable Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.
    Go to site
    Details

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.