Aussie, ME Bank and the Greater Building Society have all advised of home loan fee increases from 1 July.

Aussie will increase the application fee on its variable rate home loans to $600, up from $250 – $500 depending on the loan type. Aussie’s fixed rate home loan fees are also rising by a total of $185.

ME Bank has introduced a new $150 legal fee and $150 valuation fee on its home loans, increasing its upfront fees by a total of $300, and the Greater Building Society will introduce a $500 application fee on all of its home loans.

The Government’s ban on exit fees was supposed to be a win for Australian homeowners and borrowers, making it easier to switch home loans and stimulate competition. But news that the smaller lenders have announced price increases, while the big banks have not, confirms fears that competition in the home loan market may be lessened not increased as a result of the exit fee ban.

Mozo’s top tip for new home loan borrowers

Use the comparison rate to check the true cost of a loan. Even if you are confronted by a large upfront fee, the interest rate is still the main factor in determining the overall cost of a loan.

Got a question on home loan fees? Ask the money mavens on Mozo Answers.

There are a fews to do this, namely: using a credit card balance transfer, debt consolidation personal loan or through borrowing on your home’s equity. Each have different benefits and drawbacks depending on your circumstances, so I’ve run the rule over them to help give you a clearer picture.

Option 1: Credit Card Balance Transfers

In my opinion the best option is to take advantage of one of the balance transfer credit cards. Simply pay off all your debts with an existing card, then transfer the balance onto a new card with a balance transfer offer. Some cards are currently offering extremely low rates for long periods of time. For example, ANZ has 2.9% for 18 months, NAB has 0% till the end of the year and Westpac has 0.99% for 9 months on particular cards. Using a standard credit card* and an average credit card balance of $3,000, I used Mozo’s nifty Credit Card Health Check tool to run a few scenarios to illustrate the potential savings to be had.

As you can see, there’s a whole lot of interest to be saved. This is particularly evident in the first scenario, where making slow but steady payments of $100 a month on an ANZ First card could save you $1267 and a whole lot of time to boot. Conversely, if you’re paying it of in big chunks you’ll pay barely any interest at all with the Westpac 55 day Mastercard or Visa!

Option 2 – Debt Consolidation Personal Loans

Another option is to take out a debt consolidation personal loan. In short, you roll all your various outstanding debts into one loan which you then pay off at the rate set by the lender. They’re a decent option, but these loans tend to feature much higher rates than balance transfers. That being said, with some rates below 10% they are still potentially a lot cheaper than a credit card’s purchase rate (which can go as high as 23.5%) and are well worth looking into if you want to avoid the temptation of having another credit card in your possession.

Option 3 – Home Equity Loans

Finally, for those who have the option, a third avenue would be to look at borrowing from your home’s equity (for example line of credit home loans). This would allow you to consolidate your loans at a home loan rate much lower than what you would see in most personal loans. They won’t be as low as balance transfers, but if you’re looking for long-term solution it’s a very viable fix as the ongoing rate is far lower than that of a credit card – the flip side is that as the payment term is much longer you may end up paying more interest.

If you’ve got more questions or you’re a finance expert ready to do some answering yourself, head on down to the Mozo Answers forum.

From savings tips, managing money to home loans and student finance, Mozo Answers is the hippest hotspot to ask, learn and share money info with other Aussies and become part of the Mozo community of clever people.

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Be warned, according to several of our early adopters Mozo Answers is extremely addictive. Stay tuned in the forum for helpful hints on how to manage this addiction and other tips for staying money savvy in 2011.

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We love a good personal crusade here at Mozo HQ. So when we recently received a passionate plea from a concerned citizen questioning why internet fund transfers aren’t in real time, we thought it was worth publishing and doing some number crunching to figure out what the delay adds up to.

Here is the full article:

All internet funds transfers should be in real time.

The Banks have a privileged position in the economy being a necessity for the flow of funds through the market. Their privilege is not matched by their overweighted focus on results for the shareholders as opposed to the better good of the country. Their protests that margins have to rise to keep the banks strong and therefore benefit the community are difficult to accept when there is likely greater benefit to the economy by their measured increases in rates similar to the RBA. The out of order rise from the CBA is more an indicator that that Bank got it wrong with their risk management and we are paying for it.

There is much comment lately about how the Banks need to treat the customer fairly. There are different ways this could be addressed. My crusade for fairness is to enable all electronic transactions to be real time. For example when you make a funds transfer on the internet to pay a bill or a BPay transaction to pay a bill it should not take 1, 2 or 3 days to arrive at the destination.

Let the Banks try that trick at the supermarket checkout! It could take several days to complete the shop because we would have to wait for the funds to arrive at the Woolies or Coles account. That is not going to happen.

The Banks have the systems to achieve this now. The real time gross settlement system will allow this. Oh I forgot, you can go to your bank and request such a transfer to another person’s account if you want to pay a fee of about $35.

EFTPOS transactions are immediate. The transfer is completed while we wait. Money has moved from my account to another account because I authorised it. Why does that not happen with internet banking for individuals and business? I know there are businesses large enough that they have systems through the Bank that allow this but this must be made available to all.

Why, because the Bank has taken the funds from my account and only once they have finished investing it overnight or for three days to squeeze every last earning out it will the Bank allow it to continue on its journey. Why do I wait for three days for my funds to arrive? That is costing me interest if it is paying a credit card. If the debit is from an overdraft then it is costing me at both ends.

If the Banks are the conduit, the pipe is blocked and needs a clean out. Regulate that if there are clear funds in an account that a funds transfer to another account should be real time.
– ends –

And what about the numbers?

Let’s take UBank as an example. It recently announced that it has $5 billion in deposits. It seems common for UBank to have a 3 day delay coming in or out. All $5 billion had to get in there, and will come out again at some point, and so it loses up to 6 days of interest. At UBank’s 6.51%, that’s over $5 million [edit: $2.5 million - see comments below] windfall to the banks – and that’s just on the money in UBank.

Does that sound fair?

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Flying in the face of the majors’ insistence that interest rates “must” go up beyond the Reserve Bank’s increase, a number of smaller players have announced that they are passing on no more – and in some cases, even less.  By Friday we had heard from Newcastle Permanent Building Society, Greater Building Society and Laiki Bank – all announced a 0.25% increase.  ME Bank did the same for their super fund members’ loans, but passed on only 0.15% to their other customers.  And Yellow Brick Road, run by former Wizard boss Mark Bouris, have confirmed that they will not pass on any increases to their variable rates until February.

How can this be possible, if what the Big 4 are saying is true?  Well it seems the smaller players are taking a look at the whole picture, and realising that even if your funding costs have gone up it can make good business sense not to pass on the entire increase to your customers.  There is value to be gained in keeping prices down for existing customers in order to encourage them to stay.  There is value in keeping prices down for new customers in order to make it easier to get more of them and to keep the cost of acquiring them down.  And there is value in maintaining the standing of your brand in order that all of your other businesses remain strong.

For my sins, I have previously worked closely with the pricing boffins in large financial institutions.  I know that their pricing models are not very good at taking these other sources of value into account:  in the world of their models, if costs go up and the target return on equity remains the same then the only sure way to balance the equation out is to find costs savings elsewhere or to increase prices.  And I can tell you from personal experience that if you try to talk to them about the value to be gained from being nice to your customers, they look at you as if you are from another planet.

In some ways, getting banks to change their ways is a bit like the argument for putting a price on carbon.  If businesses place no value on CO2 emissions, then they have no incentive to take them into account in the decisions they make.  They can pollute away and we all suffer, and the only way to turn the tide is for governments to place an explicit cost on the emissions.  In the same way, if banks don’t place a value on how customers feel then someone must act to force them to.  And the most effective way of getting banks to place a real and large economic value on customer satisfaction is this:

If you don’t like your bank, leave them.  Vote with your feet.  If enough people do it, then the finance boffins will have to put it into their pricing model: when prices rise, people leave.  And only then will the bank chiefs take notice.

Don’t wait for Wayne Swan.  Or Joe Hockey.  Or GetUp, CHOICE or the ACCC.  You can make the difference.

And we hope that you’ll find all the products, rates, information and tools you need to find your new home loan, right here at Mozo.

Despite reports from ANZ, Westpac and NAB that they’d follow the RBA in maintaining current rates, each bank has left a back door open on an out-of-cycle rate rise. Take ANZ’s carefully worded commitment: “Interest rates are always under review, but there is no immediate trigger at the moment for any change.” Could an immediate trigger at another moment change that tune — for example, a CBA rise next week?

ANZ chief executive Mike Smith has already hinted at his interest rate intentions, saying that with the increased cost of foreign funding, “something has to give”. CBA’s Ralph Norris put his additional funding costs at $1.2bn a year. And while the RBA has declared that bank profits are more than healthy enough to cover these costs – earnings are up and the banks are more profitable than they were pre-crisis – the Big Four aren’t known for absorbing increased costs for the benefit of the Australian home owner.

So the general feeling is that the big banks were less than impressed when the RBA defied market expectations and sat tight on a base rate of 4.5%. It’s one thing for them to slip a few extra points onto an RBA raise. It’s another for them to slap on an out-of-cycle rise.

Back to those bullets, however — and you can probably expect a Big Four rate rise in November, regardless of the RBA’s decision. Prior to that, any enemy fire is expected to come from the Commonwealth corner, as they have the largest mortgage book and the greatest exposure to increased cost of foreign funding. Also, because they’re yet to declare their immediate position.

And any rise from CBA will likely be met with moves from the other big banks. Don’t you just love an oligopoly?

To escape the firing squad — why not check out the home loan competition? Our rate chasers will be keeping track of any rate moves throughout the month so visit our Reserve Bank Interest Rate page for all the latest info.

And stay tuned for our Rate rise punt: the real Melbourne Cup Day odds.

This is a big win for the banking industry. The measure only applies to income earned on bank accounts, savings accounts, term deposits, bonds and annuities. It will have the effect of pulling money into the banks from other investment vehicles — and from out of cookie jars and under mattresses. And it is Mr Swan’s hope – and mine, and I’m sure yours – that this extra leg up for banks will help them gather sufficient deposits to reduce the overall cost of funding their home loan products. Wouldn’t that be nice: better savings returns and cheaper home financing. Only time will tell.

But what’s it mean for you exactly? Well, at an interest rate of 5.85% (the best standard at-call interest rate in the market right now, at UBank), you’ll be able to save up to $17,000 and receive the full rate reduction. If your taxable income is between $35,000 and $80,000 then you’ll only pay an effective tax rate of 15% on interest: that means a saving of up to $150 a year. And of course the savings are even higher if you’re on a higher rate of tax.

But here’s a savings measure you can access right now. If you already have money that’s not getting the best rate in the market, you can make $150 or more by moving it. If your 17 grand is only earning 4.50%, say in an old BankWest TeleNet Saver account, then moving it to a rate of 5.85% makes you $150 — even after paying current tax rates. And you can do better yet with a Term Deposit, where plenty of providers offer well over 6% on your money for terms as short as 6 months.

If you’re not making the most of your savings, don’t wait for 2011. Mozo’s Rate Chasers have been out in the field chasing down the best rates – compare savings account and term deposit rates now.

While a lot of the focus will be on the exclusions, there were some significant steps made towards reform yesterday, the three cornerstones being:
* A 40% tax on mining industry profits, labeled as a resource rent tax on their “super profits” and netting the government $12 billion in forecast revenue between 2012-13.
* Increasing the superannuation guarantee from 9% to 12% by 2020 with the government to contribute $500 for people earning up to $37000.
* A cut in the company tax rate from 30% to 28% by 2015. Small businesses will get the cut by 2013 as well as receiving a range of other new benefits.

The changes announced yesterday have been earmarked as the first step in a wave of changes in enacting revolutionary tax reform. The government has explicitly stated that there will be more announcements in the future on savings incentives, as one of central issues to be addressed in the government’s second term agenda. This still leaves both financial institutions and consumers in the lurch for the foreseeable future however. Many hoped that by increasing bank-held deposits, the saving concessions would help reduce funding costs by alleviating the need to rely so heavily on foreign debt, thereby reducing the need for banks to enact mortgage rate rises above that of the Reserve Bank.

So all up it’s much the same for most of the players in the banking sector, at least for now anyway. All eyes now turn to Martin Place tomorrow, as we see what effect these changes (or lack thereof), will have on the Reserve Bank’s monthly cash rate announcement. Mozo’s rate chasers will be out in force, so be sure to check our Reserve Bank interest rates page from 2:30pm tomorrow to get all the latest news and rate changes as they happen.

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As always, there’s something for everyone. References to good economic news and references to risks and uncertainties. If you want to predict that rates will go up in May, you can quote him on the speed of the rate cuts in 2008/9 and suggest that he’s paving the way for faster rather than slower increases. If you want to predict that the RBA will pause in May and leave rates steady, you can quote him on the need to leave flexibility in how we respond to the way the recovery unfolds. And there’s plenty each way in his analysis of the global economic recovery.

But look closer. We’ve found an ingenious code hidden in the speeches of the RBA Governor. And an astonishing truth… unveiled at last!

He tells us that, when responding to the GFC, the RBA cut rates by 375 basis points over 5 months. And that so far, they’ve responded to the recovery by increasing them by 125 basis points over 7 months, “…which is still only about a third the pace of the earlier declines.” Now 375 over 5 equals 75, but notice that 125 over 7 is well short of a third of this – it is not even a quarter! Rather than a numerical error, this is actually a clue. To get to exactly one-third, you need 200 over 8… and a 75 basis point increase in May would do exactly that! Unbelievable!

A 75 basis point increase next month is a shocking conclusion, well outside what most observers predict, but one clearly supported by the clever trail of clues he has left. But, rest assured that this would be the final increase: his speech contains 3133 words, and 3+1+3+3 = 10, and 1+0=1, ie he’s telling us that there is just one last rate rise.

Silly? Yes, but it is no less scientific than some other predictions people make from picking apart his speeches for clues. The RBA has told us clearly that there is likely to be a little bit more to go, but that the timing is up in the air. That’s all the clues they are going to give us. Maybe May, maybe June, maybe both, maybe neither.

So instead of predicting what the RBA might do, here at Mozo we’ll keep our eyes on what financial providers do in response. Every month, Mozo’s Rate Chasers update Reserve Bank interest rates with information about home loan rate rises as it comes in. And of course, you can find everything you need in our extensive database of rates, fees and features, for home loans, credit cards, savings accounts, term deposits, personal loans and bank accounts.

mozo.com.au. we chase. you save.

St George are matching the Westpac term deposit offer, so no prizes for guessing what their home loan rates will do.

Now watch the other sheep follow the leader.

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