Australian Mortgage and Loan Information

Reflecting on the fees charged on a clients home loan I thought I would look up the RBA to see if there was any info on how much bank fees had increased over the last decade.

What I found makes interesting reading in light of the massive cuts to local jobs and outsourcing to foreign countries the banks and other financial institutions have proudly touted as the reason we “Australians enjoy the best value for money banking in the world.”

From the Reserve Bank Of Australia, Statistical Tables:

Average home loan fee income per Australian Household.

1997 $302 per household

2008 $1045 per household

That is a 246% increase in 11 years. 22.5% per year!

I guess loans are bigger now, but this is fees, not interest.
If you are getting gouged by high home loan fees consider refinance.

Transaction account fees per Australian Household.

1997 $431 per household

2008 $1792 per household

That is a 315% increase in 11 years. 28.5% per year!

Increase must be for all the convenient services they offer? We are being gouged.

Credit Card Fees per Australian Household.

1997 $135 per household

2008 $332 per household

That is a 146% increase in 11 years. 13% per year!

Competition is keeping these fees under relative control.

Total bank Fees for all Accounts and Loans per Australian Household.

1997 $1160 per household

2008 $4845 per household

That is a 317% increase in 11 years. 29% per year!

So the big four major banks cry poor, do not pass on RBA interest rate cuts, increase home loan rates above RBA increases, continue to send jobs off shore and use 1950′s like lending practices. So much for CPI and the reasons we need high home loan rates. Bank fees are a catalyst, just like fuel costs, for bringing inflationary pressure to bear on home buying Aussie battlers. I say we need more competition in the banking sector.

Please check your loan statements for errors, I recommend you do it every month. If you get your statement six monthly, get access to transactions on-line and check them monthly. Fee income as you can see is a bounty for banks, don’t let them pirate more of your hard earned income than they are entitled too.

The RBA controls interest rates to an extent, and historically rates are not that volatile compared to other developed countries.

If you have a line of credit/home equity home loan, I suggest you dig out your mortgage documents and go over your rights and obligations. Pay special attention to the fine print regarding when you have to pay the loan back and when your lender can demand you pay the loan back.

With the tightening of lending criteria, many lenders are now looking at their loan books and increasing the rates on certain home loan products. In particular they are looking closely at low doc lines of credit.

My mail is they will be adding an extra basis point or two to the rate of these types of home loans and in some case’s recalling the loan altogether. If you can convert to a full doc, do so as soon as possible or speak to your mortgage broker about your options.

Finally, check your statements, lender’s, particularly major banks make mistakes whenever there is an interest rate change. Stay on top of your finances and get some loan statement checking software. I recommend a program it is reviewed on my mortgage checker web page.

Spend what you save on a holiday or some tennis lessons for the children.

The major banks and other lenders are making it almost impossible for mortgage brokers to access low doc loans for their clients.

This is part of a push by lenders to manage their risk in this area, and make more money on their existing portfolios. The message is: if you currently have a low doc loan, you will be paying a higher interest rate in the near future.

Personally I think this is a bad thing. Low doc or liar’s loans as they are sometimes known have really helped the Australian real estate and property market over the last 10 years. They have also helped establish the mortgage broker as our preferred professional when it comes to organising our home loan and investor finance.

Your best bet moving forward is to convert your existing low doc loan to a full doc loan as soon as possible to avoid punitive action by your lender in the guise of a higher rate.

Please remember your lender is not really a friend, you are just a business transaction to the company. Treat them the same. Demand satisfactory service standards and check up on them as they check up on you. Us a loan statement checker often and review your loan PDS frequently.

Private sector house approvals fell 13.1% in December 2008 according to the Australian Bureau of Statistics.

Why is this good news? Less new dwellings being built, mean tighter supply and a probable increase in value for current stock, well that’s the theory anyway.

The reality is Australian home affordability is out of kilter with wages and incomes.
So instead of home ownership being right of all Australians, it is for now, an elite privilege.

I also see the Government’s tax revenue (It’s major income source) is down 19% for the September 08 quarter, yet it’s expense’s rose across the board. The Governments credit card is close to maxed out. Tax revenue will have to increase, or we may find the government shedding jobs. What will that do for property values?

My research into commercial properties has revealed the market to be dead in the water. Sellers are asking premium price, buyers in the main are adopting a wait and see policy.
Drive around a factory precinct near you, count the deserted properties. My gut feel is for a 50 to 60% drop in values for these properties shortly.

It is time to re-evaluate your banking, you want to cut fees, consolidate your debts, check out better deals, whatever saves you money. Get some loan checking software and use it to check your credit cards, business loans and home loans.

Hail the Reserve Bank Board for acting quickly and decisively on interest rates.

As a result and despite all the doom and gloom, bail out and prop up talk, property prices and auction clearance rates seemed to have stabilised.

Experts are predicting home loan rates are going to fall way below any previous historical low of the last fifity years. So, It is time to evaluate your current or proposed mortgage, or test “what if” scenario’s if you are considering refinancing or consolidating debt.

Loan calculators and other recourses available on the web can help you test these “what if’s”. And the best thing is they are generally free and flexible enough that you can do things like calculate the effect of interest rate rise and falls or compare loans. In most cases you can print out the results. If not then just print the web-page.

Most calculators are easy to use. Generally it is all a matter of putting your numbers in the boxes and then clicking on the calculate button. You can have a bit of serious fun just playing with them. I have gathered what I consider the best Home Loan Mortgage calculators below:

List of Calculators
Loan Comparison
Loan Payment with Amortization Schedule
Mortgage Consolidation & Refinancing
Variable vs Fixed Interest Rate
Debt Consolidation
Accelerated Debt Payoff
Loan Statement Mistake Finder

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