BALANCING ACT: Borrowers should do a review every so often to make sure their mortgage is still competitive with other lenders.
While the big banks have been attracting headlines as they cut interest rates on their fixed interest mortgages, home buyers have to keep a sharp eye on the fees and charges.
That is especially so as the falls in lenders’ revenue from mortgage fees, which have occurred since the Global Financial Crisis, have come to an end. The year to June 30, 2013 was the first year-on-year rise in the home loan fees revenue since the GFC, Reserve Bank data shows.
Households paid $1.226 billion in home loan fees for the year to June 30, 2013 compared with $1.221 billion for the previous year, or an increase of 0.4 per cent. That is in sharp contrast to the falls of the previous financial years. For example, for the year to June 30, 2012, fees fell 0.5 per cent and fell 10.8 per cent for the year to June 30, 2011.
And the lure of discounting on home loans should not distract from the fees and charges. Home buyers borrowing at least $1 million with at least a 20 per cent deposit and a good credit history are able to obtain discounts of up to 1.2 percentage points off the advertised rates on standard variable rate mortgages, says Philip Sangster, a mortgage broker with Mortgage Choice.
He says discounts of up to 1 percentage point are usually available to home loan customers borrowing at least $500,000 and up to 0.7 percentage points for those borrowing more than $250,000. At the time of writing the big banks, with the exception of ANZ, had slashed their 5-year fixed rate mortgage rates to 4.99 per cent – a record low rate.
Analysis by comparator website RateCity shows these five-year rates, after factoring-in fees, are market-leading. However, Michelle Hutchison, a spokesperson for comparator website finder苏州美甲美睫培训学校.au, says fees and charges can add thousands to the cost of a loan.
Many of the trickier fees have been removed or reduced in recent years, making it easier for consumers to assess the true cost of the loan. For example, exit fees on home loans taken out since July 1, 2011 have been banned.
Exit fees usually apply when a loan is terminated within the first three to five years, though the period can be longer. They go by a variety of names including deferred establishment fees and early repayment fees. Exit fees should not be confused with the standard discharge fees charged on the termination of the loan or with the “break” fees that can be charged on early termination of fixed-rate mortgages and reflect any financial loss by the lender.
The Australian Bankers’ Association points out total bank fees from households are about 20 per cent below the peak in 2009. Housing loans fees, despite the recent increase, have fallen by 11 per cent since 2009.
The association puts that down to competition and the reduction or removal of a number of fees such as mortgage exit fees. “Exception” fees, which include penalty fees on late mortgage payments, are almost 60 per cent lower than 2009, in part as a result of class legal actions against unfair penalty fees.
“There are plenty of home loans that do not charge fees and non-bank lenders are often more competitive than banks”, Hutchison says. “So it is worth shopping around for a cheaper deal,” she says. “Just make sure you find out all of the fees involved, not just the interest rate,” she says.
She says borrowers should do a review every so often to make sure their mortgage is still competitive with other lenders. That is what Peter Forster, a 37-year-old office manager from Melbourne, did.
Not happy with what he was paying on his mortgage he went online to see what was available. He switched to the National Australia Bank after the bank offered him a discount of 0.7 percentage points off its advertised standard variable rate on his average-sized mortgage as part of NAB’s wealth package.
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