Money

New banks on the horizon

Paul Clitheroe
Paul Clitheroe

COMPETITION among financial institutions is always good for consumers, and the new wave of 'mutual banks' could help more Australians enjoy a better deal.

You may have noticed lately that a number of credit unions and building societies - collectively known as 'mutuals', are making the switch to become 'mutual banks'.

The Defence Force Credit Union became Defence Bank earlier this year. Then, in April, Teachers Credit Union transformed into Teachers Mutual Bank.

Unlike our big banks, these mutual banks aren't listed on the stock exchange - and their customers or 'members' voted in the change. However there are good reasons behind the shift from credit union to mutual bank.

Building societies and credit unions can find it hard attracting deposits from super funds or other large institutional investors, which may only be permitted to invest with a fully fledged bank.

By becoming a bank, mutuals can expand their deposit base, which beefs up their funds available for lending, and allows the newly formed mutual bank to offer competitive car loans, personal loans and mortgages on a large scale.

This all coincides with a growing awareness of the mutual sector - undoubtedly helped along by the big banks' decision to break ranks with the Reserve Bank interest rate cycle. The consumer backlash has benefited many smaller lenders, and some mutuals such as (then) Teachers Credit Union, claim to have enjoyed 21% home loan lending growth from January to February this year alone.

So how well do mutuals stack up when it comes to saving money? A quick look at comparison site RateCity shows that with, say, Newcastle Permanent you can secure a home loan costing 6.33%;  Heritage Bank, another mutual, charges around 6.45%; or with Gateway Credit Union package home loans are available costing 6.6%.

Those rates are well below what you could pay with larger financial institutions. In mid-April for instance, the ANZ Bank lifted its standard variable rate to 7.42%.

Car and personal loans are an area where mutuals have traditionally been very competitive, and they continue to offer low rate products today.

As a guide, Teachers Bank charges 8.39% on a secured new car loan or 10.18% for older vehicles. This compares to say, 10.99% with a Westpac loan though fees and charges can push Westpac's comparison rate (which includes these costs) up to over 12%.

I'm certainly not bank bashing, and Australians are fortunate to have a healthy financial sector that includes a generous choice of institutions - large and small.

However a golden rule of personal finance is to shop around for the best deal. The internet makes it very easy for us to do this, and thanks to online banking it's not necessary to bank with an institution that has a wide branch network.

Many of Australia's smaller lenders and mutual organisations are highly competitive, that makes them worth a look if you want to save money on key household financial products.

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit www.paulsmoney.com.au for more information.

Topics:  banks competition paul clitheroe



What 'intimidated' Chris Hemsworth's Thor while filming?

Thor (Chris Hemsworth) has a new look in the third film.Source:Supplied

It looks like Chris Hemsworth met his match.

Police hone in on man's identity

Police

Police attempting to identify injured man

EXCLUSIVE: Behind the scenes with police at Splendour

COPS: Police at Splendour.

VIDEO: Police confirm patrons caught with drugs inside their body.

Local Partners

Cat survives after it causes a two car crash

A CAT was lucky to escape with all of its lives after it ran across the road and forced a car to swerve to avoid it.


Why crowds are loving Happy Kanye at Splendour

Danger Dave and Melissah Marie with the artwork Happy Kanye at Splendour in the Festival 2017.

By Barcelona-based artistic collective Hungry Castle

Amber Heard, Elon Musk among Splendour celebs

Bernard Fanning plays the main stage at Splendour in the Grass 2017 on day 2.

DAY TWO of Splendour in the Grass was the day of celebrities.

VIDEO: Girls can feel safe at Splendour

Punters at Splendour in the Grass 2016 at Byron Bay.

High visibility police will be among the crowd at all times

Diana Chan crowned MasterChef's 2017 winner

MELBOURNE accountant comes out on top after an intense 8-hour grand final showdown.

Mini ninjas get into training

Gary Nowlan, 12, of Gawler East trains in X-Park at Bounce.

Kids as young as 12 are already dreaming of becoming Ninja Warriors

Families that game together, stay together?

Gaming is becoming an increasingly popular opportunity for family bonding, according to new studies.

More parents, grandparents turn to gaming to connect with kids

Michael Phelps just raced a shark

Sharks have been snapped surrounding the carcass of a whale off the coast of Fraser Island.

Swimming legend loses by a fin in man versus beast battle

REVIEW: The Bodyguard musical is a great night out

Kip Gamblin and Paulini in a scene from the musical The Bodyguard.

PAULINI tackles Whitney Houston's powerhouse songs flawlessly.

RECAP: Game of Thrones s7 episode 2 - Stormborn

Kit Harington in a scene from season seven episode two of Game of Thrones.

*WARNING this story contains spoilers*

‘Who thought this 9/11 movie was a good idea?’

Charlie Sheen is trapped in the Twin Towers on 9/11.

Has this Charlie Sheen movie already trashed on 9/11?

Billionaire faces off with NSW Premier over Kings Forest

NSW Premier Gladys Berejiklian answers questions at the Tweed Chamber of Commerce.

Gladys Berejiklian visited the Tweed today.

'We’re goin' to Bonnie Doon!' and now you can too

How's the serenity?

The experience will have you exclaiming “how’s the serenity?”

New life for Bree and historic Oddfellows Hall

TWO CHANGES: Bree Dahl with her new baby Ivy in front of the historic Oddfellows Hall she purchased at auction and will renovate into a house.

Historic hall to be turned into home

Financial scandal destroys alternative community

Families who gave thousands to be a part of an alternative community at Mt Burrell, west of Murwillumbah, are now trying to recover their investment. Picture: Jamie Hanson

Dream Utopia turns into a nightmare