Big four vs tier 2 vs non-bank lenders: what's the difference?
Banks, customer-owned banks, online banks and non-banks compared, with real sample rates.
Short answer
Big four banks offer scale and features but often the strictest policy. Tier 2, customer-owned and online banks often price sharper, while non-bank lenders sit outside APRA's lending caps and can be more flexible, usually at a higher rate. The cheapest rate only matters if that lender will approve you.
The four main types of lender
| Lender type | Who they are | Strengths | Watch out for |
|---|---|---|---|
| Big four banks | CBA, Westpac, NAB and ANZ | Branches, full feature sets, packages | Often stricter policy; loyalty rarely rewarded |
| Tier 2 and regional banks | Smaller and regional banks | Often sharper rates and flexible policy | Fewer branches; features vary |
| Customer-owned banks | Mutual banks and credit unions owned by members | Competitive rates, member focus | Some only lend in certain states |
| Online banks | Digital-first banks with no branches | Low rates and fees | Narrower policy for complex income |
| Non-bank lenders | Lenders funded by investors, not deposits | Flexible policy for investors, self-employed and complex cases | Usually higher rates; fewer bundled features |
Banks versus non-banks: what really differs
Banks, credit unions and building societies take deposits, so APRA regulates them as authorised deposit-taking institutions. That brings prudential rules such as the 3 percentage point serviceability buffer guidance and, since February 2026, the cap on high debt-to-income lending.
Non-bank lenders do not take deposits. They are not covered by those APRA prudential rules, but they hold credit licences and must still meet responsible lending obligations under the National Consumer Credit Protection Act. In practice, that gives them room to assess deals that banks decline, usually in exchange for a higher rate.
What our latest rate run showed
On our 31 October 2026 run for an investment loan scenario (principal and interest, package product, 70% LVR), sample rates by lender type were:
| Lender type | Sample rate |
|---|---|
| Customer-owned bank | 6.39% p.a. |
| Tier 2 bank | 6.44% p.a. |
| Online bank | 6.49% p.a. |
| Big four bank | 6.57% p.a. |
| Non-bank lender | 6.84% p.a. |
Rates depend on your situation and change often. See the latest rate run.
On the same run, the non-bank lenders were among the few that could actually approve the loan. The cheapest rate is worthless if the lender will not lend to you.
How to choose the right lender type
- Simple PAYG income, low debt: customer-owned, online and tier 2 banks often win on price.
- You value branches or need bundled banking: a big four package may suit, but negotiate the rate.
- Multiple investment properties or a DTI near six: lender policy matters more than rate. See DTI over 6.
- Self-employed, recent ABN or complex income: specialist and non-bank lenders are often the only realistic option.
Can you switch later?
Yes. Many borrowers start with a non-bank lender to get a deal done, then refinance to a bank once their situation fits bank policy. Check for discharge fees and any early exit costs first. Read is your rate still competitive?
How Rate Engine helps
We compare 30+ lenders across every type and match your scenario to the lenders most likely to approve it at the sharpest rate. It costs you nothing, and on loans of $1M or more you get $1,000 cashback on top of any lender cashback. Refinancing? Start there.
Frequently asked questions
Is a non-bank lender safe?
Non-bank lenders must hold an Australian credit licence and meet responsible lending obligations. Your loan terms, repayments and protections are set out in your loan contract either way.
Are big four banks always more expensive?
Not always. They can be competitive on packages and for new customers, but existing customers often pay more than new ones.
What is a tier 2 bank?
Any bank outside the big four. The term covers regional and smaller national banks, which often compete on rate and policy.
Should I choose the lowest rate?
Choose the lowest total cost for a lender that will approve you and suits your plans, including features like offset accounts and the flexibility to refinance later.