Banks earned more than $1.2 billion from home mortgage fees last year

Banks earned $1.226 billion in fees on home mortgages in 2013, up slightly from the year before, a survey by the Reserve Bank of Australia has found.

Fee income from home lending increased by 0.4% over the year, despite a drop in exception fees (such as fees for late payment), charges for breaking fixed-rate loans, and service fees from securitised loans.

The Reserve Bank’s annual bank fee survey for 2013, released last week, included 16 financial institutions, which together accounted for about 90% of total Australian banking sector assets.

The study found that between 2007 and 2012, fees on home loans increased by an average of 2.5% a year, the fastest growth rate for fees on any category of bank product sold to households.

Account-servicing fee income from housing loans increased during 2013 due mainly to a rise in housing loan approvals.

Housing finance approvals for owner occupation rose by 1% from November 2013 to December 2013 in trend terms, according to Australian Bureau of Statistics data. Seasonally adjusted, the number of home loan approvals rose by an average of 1.44% a month over 2013, ABS data shows.

The RBA study noted that growth in housing loan approvals was usually associated with higher establishment fee income, but some banks had been waiving those fees for some customers.

Exception fee income from housing loans to households fell by 16.6% to $30 million in 2013. The RBA noted that exception fee income had declined by more than 50% since 2009.

The major banks reported low levels of bad debts during the recent reporting season and many customers were ahead on their repayments.

Overall, banks earned $4.136 billion in fees from households, an increase of 2.3%, following three years of declining fee growth. Most of the increase was driven by higher fee income from credit cards and personal loans.

From businesses and households combined, banks earned around $11.6 billion in fees in 2013.