Fees rising on many home loans

Interest rates on standard home loans continue to rise. Commonwealth Bank lifted rates (and also some business lending rates) by 12 basis points to 9.44 per cent from this week. Suncorp added five basis points to its chief rate to 9.37 per cent. St George remains the price leader in this category with a rate of 9.47 per cent.

While rates rise, banks are also busy upping fees to compensate for their reluctance to push rates as far as funding costs might dictate.

The Reserve Bank has increased official rates by one per cent since August 2007, with the big five Australian banks increasing the standard variable by an extra 25 to 40 basis points.

While none of the major banks have increased monthly service fees, other lenders are doing so.

BankWest has limited rate increases on the Mortgage Shredder product since August 2007, only increasing by an extra eight points, with the catch being the monthly service fee was pushed up three dollars to $15 per month.

For the same period the ING Direct Smart Home Loan added two new fees, with the $220 legal fee and the $180 service fee. The Mortgage Simplifier product has outpaced the RBA by 24 points since August.

Adelaide Bank's standard variable application fee has increased $245 with the monthly service fee up two dollars to $10. At Adelaide rate rises also outpaced the rise in the cash rate by 28 points.

Adelaide also increased the application fee on the HomeBuyer Power, Greatsaver and Investor Power products by the same amount, with the Variable SmartFit and SmartFix service fee changes matching the standard variable.

The Macquarie Select Classic $250,000 plus added a 100 per cent offset account to the product in August 2007, with an accompanying $20 a month service fee. The same tiered product increased rates by an additional 54 points for loans by $100,000 to $250,000.

The credit union and building society rate changes since August have been a mixed bag.

Some CUBS had previously become reliant on a securitisation fix for funding, while others had focused on attracting more deposits to fund loans.

Interest rate changes outpacing the Reserve Bank for standard variable loans are therefore difficult to compare due to such a variance in the initial rate offered.

Credit Union Australia increased the standard variable by more than Police & Nurses and Savings & Loans, but still offers a lower rate of 9.22 per cent. Albeit by only a few basis points.

Of the credit unions just passing on the actual RBA changes, the ongoing variable can differ by more than a quarter of one per cent.

Gateway Credit Union was one of these, currently offering 8.74 per cent. Compare this to Community CPS Australia and Illawarra who also tracked official movements, but offer 9.05 per cent.

Some bucked the trend and absorbed the increases. NSW Teachers has passed on only 90 of the 100 point increases since August, to offer 8.85 per cent.

Police Credit and Transcomm have also absorbed between ten and 16 points, but this can presumably be financially sustainable for only a short time.