Australian Mortgage and Loan Information

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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.

CBA to increase fixed rate lock loans by 60 basis points!

Should I lock the rate on my home loan?
This is an interesting question, and given the recent press leaks from the experts on what we should be paying for our home loans, it seems rates are unlikely to go lower. Even the RBA seems to have joined the: rates have bottomed chorus, so we are likely at the bottom of low rate the cycle. So maybe it is worth doing your sums on a rate lock.

Check with a reputable mortgage broker what rates are on offer before you jump, you may be wise to kick your old bank to the curb and find a new lender.

The main benefit of a rate lock is certainty. You will at least know what you have to pay for the period of fixed rate you choose. You may also be getting a jump on the banks, as they are likely to increase rates further if they think the market will handle it.

The downside is if rates drop further. Check out the history of rates for the last fifty years.

And finally check your loan statements, banks make mistakes every minute, make sure you are not getting ripped off. Click here for more info on loan checking software.

Are Loan Break Costs Deductible?

Are you thinking of selling your rental property to take advantage of the first home owner property bubble? Do you have a fixed rate loan?

If you are going to break a fixed interest loan agreement to sell a rental property, you should be able to claim the penalty interest as an outright tax deduction. This is because the penalty interest is a discharge cost and specifically allowed by the tax office. You must have received rental income in the year of your claim or it will not be an immediate deduction. The penalty interest and fees will be added to the cost base of your property if you have not been getting income. You won’t miss out on a tax break either way. Ask your accountant for clarification.

Check with your lender before you consider selling your rental property. You need to know exactly what fees and penalties you are up for! Also, check your current loan statements for errors.

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Once again, the popular media is full of claims that many home loan statements contain massive calculation errors. They say the simple mistakes banks and other lenders make are costing home loan borrowers big time. Incorrect date on entries, wrong interest rate, doubling up on fees and missing deposits seem to be the main culprits.

I feel like shouting at the TV when this stuff rears its head again. Get yourself some loan checking software please.

The software has been seen on…
A Current Affair
Money
7:30 Report
4 Corners
Today Tonight

If you don’t want to check your statements, be aware you may be paying a lot more of your hard earned cash to the bank than you need to. For goodness sake keep a close eye on your home loan statements.

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.

Check your statements be careful with your id.

Internet Banking is an important tool for most home mortgage holders. You can keep track of your payments, withdawals and loan limits easily with just a click from your mouse, however with the growing band of online pirates targeting Australian Banks, online banking is getting very risky.

Along with the United Kingdom, Germany, Spain and the United States., Australia is one of the most targeted countries for identity theft in the world. The pirates are getting more numerous and more brazen by the minute, so please don’t think you are immune.

I recently became a victim of these pirates. Their scheme was simple: a pop up informed me I had malware and that for X dollars I could remove it and at the same time upgrade my current anti virus software for a discount price. I was sucked in as all the icons and info mirrored my current security provider. The Trojan program installed itself and made ready to steal my financial and identity information. Luckily I realised my error in a short space of time and was able to cancel the transaction and remove the malware.

A study conducted by AusCERT earlier this year found about one in six Australian home computers is compromised by malware. AusCERT stands for Australian Computer Emergency Response Team. The general manager of AusCERT Mr Graham Ingram stated recently: “Where once a web user had to click a web or email link to become infected, now a visit to a trusted site could deliver what is known as a “drive-by download”. “Their target I your personal data. The ability to impersonate someone gives thieves access to bank accounts and corporate secrets that can be used to even manipulate share prices.”

I don’t condone giving into the pirates, the convenience of internet banking is worth to much. All I can suggest is that you are vigilant and make sure you have a reputable anti virus like Norton 360 or
Pc-cillin and check your statements regularly for errors as well as for fraudulent transactions,