Big four banks vs non-bank lenders

The core difference: where the money comes from

A bank funds mortgages largely from customer deposits and holds an ADI (authorised deposit-taking institution) licence, which means APRA regulates its capital. A non-bank lender has no deposit base — it raises money through securitisation and wholesale funding markets, then lends it out.

That funding difference drives everything else. Banks have cheap, stable funding and can price aggressively for low-risk borrowers. Non-banks pay slightly more for their money, so they compete on flexibility and credit policy instead of always on headline rate.

Where the big four usually win

• Sharpest pricing for clean, low-LVR, PAYG borrowers — especially under 80% LVR with strong income.
• Branch networks, in-house valuations and package deals bundling offset, credit cards and transaction accounts.
• Cashback and retention offers used to keep or win refinancers.
• Broad acceptance of unusual security types when the borrower profile is strong.

Where non-banks usually win

• Credit policy: defaults, arrears, discharged bankruptcy, ATO debt and short trading history are often assessable rather than an automatic decline.
• Income treatment: one year of tax returns for self-employed, 100% of overtime and casual income for stable employment, more generous treatment of commission and bonuses.
• Speed: a smaller, human credit team can turn around a straightforward file in days rather than weeks in peak periods.
• Alt-doc lending: BAS, accountant declarations and business bank statements accepted where a bank demands two full tax returns.

What you actually give up with a non-bank

Usually a slightly higher rate — anywhere from a few basis points to well over 1% for a specialist file, priced to the risk. Some non-bank products have simpler feature sets, and a handful charge higher establishment or annual fees.

You are not less protected. Non-bank lenders hold an Australian Credit Licence, are bound by the National Consumer Credit Protection Act and responsible lending obligations, and are members of AFCA, the same external dispute resolution scheme as the banks. Your loan contract is legally identical in force.

The strategy most brokers actually use

Use a non-bank to get the deal done, then refinance to a prime bank once the file is clean. If you've had a default, a short self-employed history, or a patch of arrears, a non-bank approval at a higher rate today buys you 12–24 months of perfect repayment history.

Once that history exists and the default ages, you refinance to a mainstream bank at a mainstream rate. The extra interest you pay in the interim is usually far cheaper than staying out of the market or renting for two more years.

A note on rates

Rates and policies change constantly, and every lender prices to its own funding costs and risk appetite. Nothing on this page is a rate quote — it's a guide to how these lender types differ so you know where to look.