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.

REVEALED: Ipswich to host Broncos in pre-season clash

IPSWICH BOUND: Broncos star Anthony Milford in action. The Broncos are set to play the Ipswich Jets at North Ipswich Reserve on February 11 next year.

Bennett's boys set to light up North Ipswich Reserve on February 11

Coward punch killer pleads guilty in Lindsay Ede case

Lindsay Ede

Ariik Mayot could face life in jail for attack on Ipswich granddad

How one man proved an Ipswich magistrate wrong

A Coast pensioner has been refused bail after being charged with drug trafficking.

Man successfully appealed traffic conviction

Local Partners

Heatwave to continue for days as temps top 40 in some areas

IF you want to experience the pure heat of the start of Queensland's scorching weather, you can't go past Birdsville.

Man builds playground entirely out of packing tape

Artist Eric Lennartson is in the process of completing his huge tape sculpture at the Ipswich Art Gallery.

VIDEO:And here's where you can play on it.

Countdown to Woodford Folk Festival begins

ECONOMIC BOON: Woodford Folk Festival is celebrating its 30th anniversary this year.  Photo Contributed

The first larger-than-life inhabitants have stepped into Woodfordia

'I need to do what I can': 65km walk for cancer patient

Karlee Robinson is walking from Caloundra to Noosa for her cousin Aaron Parker, who has terminal brain cancer.

What do you do when someone you love has terminal brain cancer?

Ricky Gervais announces first dates of world tour

Ricky Gervais has announced his first world tour in seven years.

Johnny Depp and Amber Heard in 'final stages' of divorce

Depp's outstanding divorce money to be paid over 15 months

Mila Kunis and Ashton Kutcher welcome their second child

Mila Kunis won't be naming her second child 'Hawkeye'

First look at Russell Crowe and Tom Cruise in The Mummy

Russell Crowe in a scene from the first teaser trailer for the movie The Mummy.

HOLLYWOOD heavyweights helm serious reboot of action franchise.

Joseph Gordon-Levitt: Fame is 'unhealthy'

Joseph Gordon-Levitt

Joseph Gordon-Levitt feels bad perpetuating celebrity culture

Man who played Manuel in Fawlty Towers has died, aged 86

Manuel from the comedy hit Fawlty Tours, has died aged 86

Coast high-flyer's fight back from bankruptcy, $72m debt

Scott Juniper went from millionaire developer to declaring bankruptcy in2012, now he is back on top of his game again with new developments including this one in Coolum.

'Apocalyptic lending storm' causes financial collapse.

How your home can earn you big $$$$ this Christmas

This luxury Twin Waters home rents out over Christmas for more than $6000 a week.

Home owners earning thousands renting out their homes this Christmas

2000 jobs at multi-million dollar Ipswich project

INSIDE: Artist's impressions of the interior of the new Eastern Heights aged care precinct.

Sub-contractors needed to build $15m aged care facility

Iconic beach shack rises from the ashes

Inspired by the Dailys stories on the need for beach shacks, popular Coolum restaurant MyPlace has transformed its inside into a beach shack.

And the iconic 'guitar house' saved for now

Ready to SELL your property?

Post Your Ad Here!