What is the downside of using a brand-name lender?

Using a brand-name lender for a mortgage or any financial product can offer a sense of security and reliability due to their established reputation and widespread recognition. However, there are potential downsides to consider: Higher Costs: Brand-name lenders may have higher interest rates or fees compared to smaller or online lenders. The premium for their brand recognition and perceived reliability can sometimes lead to less competitive pricing. Less Flexibility: Larger, brand-name lenders might have stricter lending criteria and less flexibility in negotiating loan terms. Their size and the volume of applications they handle can make it more challenging to get personalized service or exceptions to their standard policies. Customer Service: While not always the case, some brand-name lenders might not offer the same level of personalized customer service as smaller lenders. High demand and large customer bases can lead to longer wait times and less individual attention. Innovation and Product Range: Some brand-name lenders may be slower to innovate or adapt to new technologies compared to smaller, more agile competitors. This could mean a narrower range of products or services and slower adoption of customer-friendly technologies. Over-reliance on Brand: Customers might choose a brand-name lender based on reputation alone, without thoroughly comparing other options that could be more suited to their needs or offer better value. Bureaucracy: Larger institutions can have more layers of bureaucracy, making the loan application and approval process longer and potentially more frustrating. Cross-Selling: Brand-name lenders may use your relationship with them to cross-sell other products and services, which can be annoying if you're not interested and may not always be the best deal available. It's important to note that these downsides are potential issues and may not apply universally to all brand-name lenders. Some may offer competitive rates, excellent customer service, and innovative products. The key is to shop around, compare offers, and read reviews and testimonials to make an informed decision that best meets your financial needs and preferences.

Big 4 banks dominate the Australia mortgage market with combined over 77% of the home loan market share. CBA is the leading mortgage provider and accounted for roughly 26% of the mortgage market in 2021. Many borrowers go to the big 4 banks whose name they recognise or already have existing relationships with, because in a complex market filled with booby traps and predators, name recognition provides comfort. Especially after the global financial crisis (GFC), many people feel more comfortable banking with the big 4 banks, and later become their first point of contact when they are ready to get a home loan. On the other hand, big 4 banks tend to price a little above the market. They like to say that they provide better service than bargain-basement lenders. What they mean is that borrowers should be willing to pay something more for the comfort of dealing with them. For example, at the time of writing, you can get a basic variable rate home loan from CBA at 3.79%, but if you take time to look around, you can find a similar basic home loan from ME bank at 3.50%. That's a saving of $120 a month on a $500k home loan. Sometimes price is not everything. There are customers who value convenience and are willing to pay a little bit more for greater access to local branch support, and greater ATM access. Some customers prefer to speak to a real person to guide them with a mortgage application and aren't comfortable with online-only lenders. Some customers choose lenders based on lenders’ technology capability, such as PayID and Osko, so they can make transfers between financial institutions instantly. Those are often the competitive advantages from the brand-name lenders over the smaller banks or non-bank lenders. The bottom line is that you may pay a premium price dealing with the mainstream banks. If you are smart and forceful or have support from a mortgage broker, you might negotiate a better deal - a price below the listed price. This could be as good a deal as you might get anywhere else.