Home loans from customer-owned banks

author-avatar By on November 28,2019
Home loans from customer-owned banks

Photo by Helena Lopes on Unsplash

There are dozens of “not-for-profit” banks in Australia, known as customer-owned banks, which can offer some great value home loans.

Everyone’s heard of the big four banks, as well as the likes of ING, Macquarie, Bendigo Bank and so on. But had you ever heard of Coastline Credit Union? The Capricornian? Lithuanian Co-operative Credit Society “Talka” Limited?

No, those aren’t local rugby teams – they’re customer-owned banks, also known as mutual banks. And just because you haven’t heard of them doesn’t mean you should write them off as your potential lender. 

In this article, we’ll go through the basics of customer-owned banks: what they are, who the biggest ones are, what kinds of loans they offer, and how they compare to some of the other prominent banks in the market. 

On this page:

What is a customer-owned bank? 

Customer-owned banks are ADIs that are owned and operated with the sole purpose of providing banking services to members (i.e. customers) rather than generating a profit. In other words, they don’t have shareholders and instead reinvest profits either back into the bank itself or into the community. 

In terms of products they can offer, there’s no real difference between mutual banks and retail banks – they can all offer home loans, credit cards, deposit products and more. 

In recent years, banking with a mutual bank has become more and more popular. According to the latest data from end of financial year reports, the combined market share of the big four is down nearly 1%, while a 2019 report from KPMG found customer-owned banks actually increased their residential lending portfolio by 7.3% that year. Mutuals have about $125 billion in total assets combined, which is about 2.5% of the total banking market.

This isn’t a whole lot, but is a marked gain on previous numbers when you consider the sheer size of the big four and other retail banks. More recent research from the Australian Prudential Regulation Authority (APRA) found the major banks grew by their lending by 2.6% in 2019, for comparison.

“With growth rates like this it’s clear that word of our sector’s customer satisfaction scores, competitive interest rates and innovative services is spreading,” Customer Owned Banking Association (COBA) CEO Michael Lawrence said. 

“Australians want, and deserve, to be put first by their bank. Thankfully there’s an entire sector with a 150-year legacy of doing just that.

“These figures are a positive indicator of improving competition, but now is not the time to become complacent. If greater customer outcomes are the goal, then greater competition is the means.”

In the words of Mr Lawrence and the customer-owned banks themselves, the fact that they’re not for profit means they can pass on better rates and fees to their customers, while also offering better service. This is sometimes true, but not always, and we’ll explore just how good the interest rates from mutual banks really are. 

Who are the customer-owned banks? 

There are more than 70 customer-owned banks in Australia, from large customer-owned institutions that operate nationally, to tiny little coastal credit unions dedicated to serving the local township’s inhabitants. While not all mutual banks will be on there, COBA has a list of each of its 64 member institutions here

The 10 biggest (by total assets) Australian customer-owned banks, according to KPMG’s 2019 Mutuals Industry report, are: 

  1. CUA
  2. Newcastle Permanent 
  3. Heritage Bank (formerly Heritage Building Society)
  4. People’s Choice Credit Union
  5. Teachers Mutual Bank (formerly Teachers Credit Union)
  6. Greater Bank (formerly Greater Building Society) 
  7. Bank Australia (formerly Members and Education Credit Union)
  8. Beyond Bank (formerly Community CPS)
  9. IMB Bank (formerly Illawarra Mutual Building Society)
  10. P&N Bank (formerly Police & Nurses Credit Society) 
Source: KPMG

CUA

Founded in 1946, CUA – short for Credit Union Australia – has grown to become the country’s largest customer-owned bank, offering financial and insurance products to over 500,000 Australians. CUA is based in Brisbane and was named the “Most Innovative Mutual” by the Australian Banking Innovation Awards 2019.

In 2019, CUA had more than $17 billion in total assets. 

Newcastle Permanent 

Newcastle Permanent is the second-largest customer-owned bank in Australia and touts itself as an alternative to the big banks. It has over 300,000 customers and nearly 1,000 staff, and given the name, it is unsurprisingly based in Newcastle. 

In 2019, Newcastle Permanent had nearly $11 billion in total assets. 

Heritage Bank 

Based in Toowoomba, Queensland, Heritage Bank originally began as the Toowoomba Permanent Building Society in 1875. It changed its name to Heritage Bank in 2011 but remains one of the oldest financial institutions in Australia (still standing). 

In 2019, Heritage Bank had about $10 billion in total assets.

People’s Choice Credit Union

People’s Choice Credit Union, or People’s Choice for short, has more than 360,000 members across Australia. It began in 1949 but became what it is today after the merger of Australian Central and Savings & Loans in December 2009.

Its headquarters are in Adelaide, and Roy Morgan named it the country’s best credit union in 2014, 2016, 2017 and 2018. In 2019, People’s Choice had more than $8 billion in total assets. 

Teachers Mutual Bank 

Based in Homebush, NSW, Teachers Mutual Bank was created in 1966 by teachers for teachers as Teachers Credit Union. It’s now available to everyone, and has over 200,000 members across the country, making it one of Australia’s largest mutual banks. 

In 2019, Teachers Mutual Bank had about $8 billion in total assets. It also owns Firefighters Mutual Bank, Health Professionals Bank and UniBank.

Greater Bank 

Greater Bank began as the Newcastle and Hunter River Public Service Starr-Bowkett Building Co-operative Society Limited, or NHRPSSBBCSL as you might know it. It changed its name to Greater Bank in 2016, and today claims to have more than 250,000 customers. 

In 2019, Greater Bank had nearly $7 billion in total assets, and is based in Newcastle NSW. 

Bank Australia 

Bank Australia was first established in 1957 as CSIRO Co-operative Credit Society, before rebranding to Bank Australia in 2015. Over its history it has unified 72 credit unions, eventually becoming Australia’s first customer-owned bank. As a ‘responsible lender’, Bank Australia does not lend to industries operating in: 

  • Fossil Fuels
  • Live exports
  • Gambling
  • Intensive animal farming
  • Weapons
  • Tobacco

Bank Australia’s headquarters are in Kew, Victoria, and it has more than 400 staff and over 125,000 customers. Bank Australia also had about $6 billion in total assets in 2019. 

Beyond Bank 

Beyond Bank Australia, or just Beyond Bank, is headquartered in Adelaide. It’s 100% customer-owned and became so in 2013, and is comprised of other institutions such as My Credit Union, Country First Credit Union, Alliance One, Wagga Mutual Credit Union and more. 

In 2019, Beyond Bank had just over $6 billion in total assets. It also has nearly 250,000 customers, 40+ branches and a national Australian-based call centre. 

IMB

Based in Wollongong, IMB was established way back in 1880 as Illawarra Mutual Building Society and is one of Australia’s biggest mutuals. IMB has over 200,000 members and a growing branch network in Illawarra, Sydney, NSW South Coast, the ACT and Melbourne, whereas many other mutual banks tend to be more online-focused. 

In 2019, IMB had just over $6 billion in total assets. 

P&N Bank 

P&N Bank is the only West-Australian bank in the top 10, based in Perth. This makes it the largest bank-owned and managed in Western Australia. The P&N stands for police and nurses – it originally began in 1969, but the merger of Police Credit Society and the Nurses Credit Society led it to be named the Police & Nurses Credit Society

P&N Bank had just over $4 billion in total assets in 2019. 

What home loans do customer-owned banks offer? 

Customer-owned banks are plentiful, as the data above shows, and the larger ones are able to offer home loans for all sorts of different circumstances: 

  1. Owner-occupier home loans
  2. Refinance home loans
  3. Guarantor home loans
  4. Investment home loans 
  5. Low-doc home loans
  6. Construction loans
  7. Bridging loans
  8. Line of credit home loans

See our article on each of the different types of home loans here for more information on these types of home loans, and have a look at the tables below to see some of the lowest-rate home loans on offer from customer-owned banks for:

These loans are for owner-occupiers only – for a look at investment home loan rates from these institutions, see our investment home loan comparison table.

For the sake of consistency, only three-year fixed terms have been considered for the fixed-loan table. 

Customer-owned bank home loans: Variable, principal & interest

Provider Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
 
Achieve Variable P&I 2.98% 3.03% $1,682 More details
Discount Variable P&I 3.07% 3.09% $1,702 More details
Basic Variable New Business Special 3.08% 3.08% $1,704 More details
Budget Owner Occupied 3.18% 3.24% $1,725 More details
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
Achieve Variable P&I
2.98% 3.03% $1,682
More details
Discount Variable P&I
3.07% 3.09% $1,702
More details
Basic Variable New Business Special
3.08% 3.08% $1,704
More details
Budget Owner Occupied
3.18% 3.24% $1,725
More details

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of 80% or less. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 2 December 2019. View disclaimer.

Customer-owned bank home loans: Variable, interest-only

Provider Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
 
Real Deal IO Special Offer 3.19% 3.20% $1,063 More details
Achieve Variable OO IO 3.30% 3.06% $1,100 More details
Discount Variable IO 3.43% 3.44% $1,143 More details
Budget Owner Occupied 3.48% 3.36% $1,160 More details
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
Real Deal IO Special Offer
3.19% 3.20% $1,063
More details
Achieve Variable OO IO
3.30% 3.06% $1,100
More details
Discount Variable IO
3.43% 3.44% $1,143
More details
Budget Owner Occupied
3.48% 3.36% $1,160
More details

Base criteria of: a $400,000 loan amount, variable, interest-only (IO) home loans with an LVR (loan-to-value) ratio of 80% or less. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 2 December 2019. View disclaimer.

Customer-owned bank home loans: Fixed, principal & interest

Provider Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
 
Residential Fixed 3yrs 2.84% 3.37% $1,652 More details
Basic Fixed 3yrs 2.94% 3.68% $1,673 More details
Great Rate Discount 3yrs 2.97% 3.68% $1,680 More details
3yrs Fixed Owner Occupier 2.98% 4.29% $1,682 More details
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
Residential Fixed 3yrs
2.84% 3.37% $1,652
More details
Basic Fixed 3yrs
2.94% 3.68% $1,673
More details
Great Rate Discount 3yrs
2.97% 3.68% $1,680
More details
3yrs Fixed Owner Occupier
2.98% 4.29% $1,682
More details

Base criteria of: a $400,000 loan amount, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of 80% or less. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 2 December 2019. View disclaimer.

Customer-owned bank home loans: fixed, interest-only

Provider Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
 
Standard Fixed 3yrs 2.97% 3.87% $990 More details
Residential Fixed 3yrs 2.99% 4.46% $997 More details
Residential Fixed IO 3yrs 2.99% 4.15% $997 More details
Great Rate Discount IO 3yrs 3.07% 4.46% $1,023 More details
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
Standard Fixed 3yrs
3.07% 3.87% $990
More details
Residential Fixed 3yrs
2.99% 4.46% $997
More details
Residential Fixed IO 3yrs
2.99% 4.15% $997
More details
Great Rate Discount IO 3yrs
3.07% 4.46% $1,023
More details

Base criteria of: a $400,000 loan amount, fixed, interest-only (IO) home loans with an LVR (loan-to-value) ratio of 80% or less. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 2 December 2019. View disclaimer.

How do the customer-owned banks’ rates and fees compare to other lenders?

Customer-owned banks can offer some great value home loans with low interest rates and fees, but remember there are thousands and thousands of home loan products on the market. What you can see in the tables above don’t tell the full picture – not all customer-owned bank home loans products will have rates as low as the ones displayed.  

Don’t automatically assume customer-owned banks offer the best rates on the market just because they say they do. It’s very possible (probable) that there are better rates out there, so broaden your search to include some of these other types of lenders too.  These other types of lenders include: 

  • Non-bank lenders: Non-bank lenders are financial institutions that don’t hold an ADI license, meaning they can’t offer deposit products such as savings accounts, transaction accounts or term deposits, but can still offer home loans.
  • The big four banks: The big four banks – ANZ, Commonwealth Bank, NAB and Westpac –  take up much of the home loan market in Australia as we discussed before, and have more than $1 trillion in assets under management together. 
  • Retail banks: Some of the biggest retail banks outside of the big four also have billions and billions of loans and assets under management, such as the likes of ING, Macquarie Bank, Bendigo and Adelaide Bank, HSBC, AMP and more. 
  • Neobanks: there’s been a spate of new fintech ‘digital’ or ‘neo’ banks popping up lately such as Up, 86 400 and Judo Bank, which claim to be fast and cheap online alternatives to banking. While few of them offer home loans at the moment, they have stated they plan to do so in the near future. 86 400, for example, recently announced the release of its broker-based home loan products. 

The table below displays a selection of variable-rate home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks.

Provider Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
 
Purchase or Refi, P&I 80% Smart Home Loan 2.88% 2.90% $1,660 More details
Discount Variable 80% 3.07% 3.09% $1,702 More details
Base Variable Rate Special P&I 3.20% 3.20% $1,730 More details
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
Purchase or Refi, P&I 80% Smart Home Loan
2.88% 2.90% $1,660
More details
Discount Variable 80%
3.07% 3.09% $1,702
More details
Base Variable Rate Special P&I
3.20% 3.20% $1,730
More details

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 1 November 2019. View disclaimer.

Customer-owned bank home loans – pros and cons 

No bank is perfect. Here are the various pros and cons of banking with a customer-owned institution: 

Pros

  • Customer-owned banks can offer some competitive interest rates and low fees 
  • They have the same consumer protections as the big banks
  • They can represent a certain local area 
  • They can have strong customer service with good online capabilities 
  • They have strong average customer satisfaction ratings, according to Roy Morgan Research 
  • You become a part owner in the bank and have a say in major company decisions 

In addition to these advantages, customer-owned banks must obey the ’10 Key Promises’ outlined by COBA’s Banking Code of Practice. These 10 promises are as follows: 

  1. We will be fair and ethical in our dealings with you
  2. We will focus on our customers
  3. We will give you clear information about our products and services
  4. We will be responsible lenders
  5. We will deliver high customer service and standards
  6. We will deal fairly with any complaints
  7. We will recognise our customers’ rights as owners
  8. We will comply with our legal and industry obligations
  9. We will recognise our impact on the wider community
  10. We will support and promote this Code of Practice

Read more about the COBA code of practice here

Cons

  • You might struggle to get approved – their smaller size means many mutual banks only take customers with good credit ratings and a strong deposit
  • If you can’t meet these conditions, you might have to pay a much higher interest rate 
  • Smaller lenders might have fewer loan options 
  • The very small ones might rely on branch banking with sub-par online offerings – mainly due to a lack of resources
  • With the cash rate as low as it is, smaller lenders might struggle to pass on future rate cuts to home loans  

Savings.com.au’s two cents 

There are alternatives to the big banks out there. In fact, nearly 100 authorised deposit-taking institutions (ADIs) are registered with APRA, plus a number of non-bank lenders offering home loans.  

Customer-owned banking is growing in popularity, and with competition so strong at the moment, now could be a good time to open a new home loan with one or refinance from your existing lender.

Consider consulting a mortgage broker too if you need help choosing the right home loan.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate includes both the interest rate and the fees and charges relating to a loan, combined into a single percentage figure. The interest rate per annum is based on a loan credit of $150,000 and a loan term of 25 years.

Latest Articles

author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

Get free insights & tips monthly

By subscribing you agree to the Savings Privacy Policy