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Avoid the sting: Banks take $5billion a year from home owners
RateCity investigates just how much income banks earn from your home loan fees and how you can lessen the sting.
June 23, 2010
Do you currently have a home loan and always seem to be paying fees? Well, the banks aren't complaining as they profit from your money.
The Reserve Bank of Australia (RBA) recently released a report that showed the amount that banks made from Australian households in fees associated with home loans. It reported that the income banks received from housing loan fees in 2009 increased by 3 percent to $5 billion.
This growth in fees increased by 17 percent in 2009 compared to 2008, due to a rise in the number of home loans, which increased in value to $1.25 billion, the RBA said. This is a significant increase when compared to the current average annual growth of 7 percent recorded between 2003 until 2008.
What are borrowers paying for?
The RBA said the reason for this high growth was due to a significant increase in establishment and early-exit fees as well as break fees on fixed-rate loans. This was caused by a large number of borrowers requesting to switch their home loans from fixed to variable rate loans due to the significant fall in the cash rate during 2009.
The report also showed mortgage customers are starting to be more careful with meeting repayment, as exception fees for home loans decreased by 6 percent to $42 million in 2009. However, exception fees and many other charges are often easily avoided.
Dodge the fees and save
If you have a home loan or are in the market for one and want to reduce the amount you spend in fees, here are some tips to help you save.
- Compare home loans online so you can sort through hundreds of mortgages and compare fees and rates.
- Some mortgages have ongoing fees while others don't so make sure you take this into account when looking for a home loan and look out for ones that offer lower or no ongoing fees.
- Create a budget to assist you with keeping track of your expenses. This will ensure you have enough money to meet your repayments and you don't fall short. This will help you to avoid exception fees charged for not meeting your repayments on time for the right amount.
- Make sure you read all of the required paperwork before signing so you are aware of all of the associated fees and charges so you know exactly how much you can be charged.
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