Aussies are paying less in home loan fees, says RBA

By Polly Fleeting · · 3 min read
Fact Checked
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The annual Reserve Bank bank fee survey revealed that banks’ income from home loan fees has decreased by 7%, despite an incline over previous years.   

In 2018, household fees, which include credit cards (41%), home loans (28%) and deposits (22%), made up around one third of the overall fees income of banks across the country.

According to the RBA, the drop in income made from home loan fees was largely a result of fewer new and refinance loans being taken out over the course of the year.

They also stated that the decline is, in part, due to banks and lenders waiving ongoing service and annual fees across a number of products for their customers. 

How to reduce fees on your home loan

While there was a decline in the income that banks made on home loan fees, there are plenty of fees and charges that could trap you and potentially cost a lot over the life of your mortgage.

So, here are some useful tips to help you save on both upfront charges and ongoing fees on your home loan.

Upfront charges

  • Opt for a low or no application fee: This is generally the first fee you’ll face when taking out a home loan. While there are loans that don’t charge an application fee, some lenders will charge you, so choose wisely because if you avoid paying a lot in fees early on it could really help your overall savings down the track.
  • Check for valuation, legal and other one-off charges: This can be a little bit of a juggling act, but sit down, read the fine print and crunch some numbers to make sure your not about to waste hundreds of dollars on multiple upfront fees when similar loans charge less.
  • Be aware of whether you need Lenders Mortgage Insurance (LMI): If you’re loan to value ratio (LVR) is more than 80% of the property’s value, you are subject to being charged for LMI from your lender.
  • Stay on top of government fees: These charges come directly from the Australian government, not from your lender, and cover stamp duty on your home loan. Keep in mind costs will depend on the cost of the property, what type of borrower you are (like a first home buyer) and what state you are in.

Ongoing fees

  • Avoid monthly service and annual fees: There are home loans lenders that don’t charge ongoing fees, like Athena and UBank. Every dollar that remains in your pocket, and not in the hands of your lender, is crucial, so choosing a loan without a monthly or annual fee could save you hundreds (if not thousands) over its life.
  • Make sure features don't come with fees: While home loan features like an offset account, extra repayment and a redraw facility are really useful, some lenders charge borrowers for using them. If you foresee yourself using one of these features, make sure that you go with a lender that offers them for free.
  • Take steps to avoid extra costs if you can: To dodge charges like late payment fees, set up an automatic direct debit to stay on top of your repayment schedule and make sure you are making minimum payments on time.

RELATED ARTICLE: More lenders slash their fixed home loan rates following RBA cut

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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