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


Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

OPINION: Kid burnout makes no sense

Riley Dobson does a burnout at the property of his family in Thagoona.Photo: Contributed

SHOULD Alex Dobson have let his son do a burnout?

Masked men armed with large hammer hold up store

An armed robbery took place at the IGA in Goodna at 6am this morning (27-9-16).

They made off in a black car with no plates

Ipswich man charged after fracas with police

Police tape restricts access to a crime scene north of Sydney, Friday, July 24, 2015. (AAP Image/Joel Carrett) NO ARCHIVING

Brassall man alleged to have threatened police with knife

Local Partners

Backpacker tax scrapped as changes bite on farmers

Region's farmers still unhappy with decision

Get ready to say goodbye to another Aussie icon

Say goodbye to the iconic Sunnyboy iceblock.

Nostalgic ice blocks will be sold no more

OPINION: Kid burnout makes no sense

Riley Dobson does a burnout at the property of his family in Thagoona.Photo: Contributed

SHOULD Alex Dobson have let his son do a burnout?

Masked men armed with large hammer hold up store

An armed robbery took place at the IGA in Goodna at 6am this morning (27-9-16).

They made off in a black car with no plates

Ipswich man charged after fracas with police

Police tape restricts access to a crime scene north of Sydney, Friday, July 24, 2015. (AAP Image/Joel Carrett) NO ARCHIVING

Brassall man alleged to have threatened police with knife

Meteor and earthquake strike Queensland in one night

Some assumed it was “a flare” or a “power surge”

UPDATE: Woman remains in critical condition after crash

A woman is fighting for her life after the double crash. Photo: Trev The Towie.

VIDEO: A woman is fighting for life after an accident this morning

Dad defends letting five year old do burnout

Five-year-old Riley Dobson has become a viral sensation after his dad Alex filmed him doing a burnout on their Thagoona property.

The single dad says he built the car with his son

Classic car auction draws buyers from US, Dubai

"He wants everyone to enjoy the cars, the collection got too big'

Why Chris Hemsworth was spotted wearing nail polish

RED CARPET: Do you think Chris Hemsworth is the typical unpolished but well-natured Aussie bloke?

He's now officially the best bloke in Australia

Testament's new album is a concept album

ROME, ITALY- JULY 27, 2016: Testament photographed at The Roman Collisseium in Rome, Italy on July 27,2016. Gene Ambo

Testament to release new album

'Baby' recreates famous Nirvana cover shot 25 years later

The baby from Nevermind album has recreated the iconic cover shot.

PREVIEW: Luke Cage origin story is a strong addition to MCU

Mike Colter in a scene from the TV series Marvel's Luke Cage.

MIKE Colter stars as latest Marvel superhero to get his own series.

Kate goes down fighting in heated Survivor elimination

Australian Survivor contestant Kate Campbell.

YOGA teacher's 'good guys' alliance fails to get off the ground.

Emily Blunt's (almost) singing career

Emily Blunt nearly became the British Britney Spears.

$40million hotel, shops development project for Mackay

Mt Pleasant hotel and retirement accommodation, proposed at 194-202 Malcomson St.

$40m development to take Mackay to 'the next level'

Five ways to slash household bills and save the environment

THINK GREEN: Considering the environment when building or buying your next home can save you big dollars. The Village Building Company, who is responsible for Woodlinks Village at Collingwood Park, builds homes with this front of mind.

THERE is nothing as sweet as slashing dollars from your bills.

Property 200m from ocean selling for just over $100K

BEACHCOMBER PARK: Work has started on a new $19.2 million development at Toogoom.

The estate's developer is offering huge discounts for early buyers.

UPDATE: Former rodeo champ's sale rained out, now back on

Larkhill local Ken Consiglio is having an auction of most of the things on his property.

'People kept showing up and we had to turn them away'

First stages of $25 million housing development underway

New development on Madsen Rd - The Springs.

The blocks of land are much bigger than usual

Couple build their own 'tiny house' for $45k

Holly Bowen and Oli Bucher built their "tiny house" themselves, only hiring a plumber and an electrician. Photo/supplied

The house, which is built on a trailer and can be towed.