June 23, 2011
Australians paid $834 million fewer in fees on household bank accounts last year compared to 2009, shelling out around $4 billion in total. But home loan fees increased in the same period, up 2 percent, although that was less than in the past – the average annual increase over the previous five years was 9 percent.
While the overall drop is a welcome reprieve, RateCity chief executive Damian Smith says Australians are still paying too much in bank fees.
“Despite a drop in total household bank fees, banks still increased their revenue for home loan fees by $26 million last year,” he says. “This is quite surprising because the number of home loans taken out in 2010 – including refinancing – was 21 percent less than in 2009.”
How to avoid paying fees
There are ways to avoid paying unnecessary fees on your mortgage here are a few tips to get you started:
- Set a budget to avoid defaulting.
- Regularly check your account balance.
- Don’t be late.
- Maximise your redraw facility.
- Use comparison sites to find a cheaper option.
Firstly, by setting a budget and sticking to it means you’ll always have enough money in the bank to cover your monthly repayments. Therefore you’ll avoid defaulting and the hefty fees and charges that may result. Keeping an eye on your bank balance will help to avoid defaulting too.
Another way to ensure your repayments are made on time is to set up an automatic payment schedule, so you never miss the repayment date. Give yourself a grace period of a few days following your pay date and before your repayment due date. So even if your pay is a day late, you’ll never miss a repayment.
Opt for a home loan with redraw facility, one that allows you to put more money towards your loan when you have cash available and then withdraw it when necessary and without penalty.
Finally, compare home loans online to find a better deal, because by shopping around Australians can save at least $500 in fees, Smith says.
“Ongoing fees will seriously add to the cost of a home loan. If you are paying a 7 percent interest rate with a $240 annual fee for instance, you’re basically adding an extra $6000 to your 25-year mortgage or increasing your interest rate by 10 basis points,” he says.
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