Choice (Australian Consumer’s Association) recently released a report estimating the major banks are charging consumers $4 billion a year in fees.
Senior borrowers are among the worst affected, with reverse mortgages by two of the largest banks both attracting monthly fees of $12 and $15 respectively. These fees will immediately attract interest, which will eventually compound. Based on their current rate of 10.49%, a monthly reverse mortgage fee of $12 would attract approx $8,000 in compound interest over 20 years!
Some may argue that the monthly fees and higher interest rates charged by the big domestic banks are offset by the security their balance sheet (size) offers consumers. However, for those more concerned with price the good news is there are also much cheaper alternatives available in the market. Many lenders do not charge monthly fees at all, and have significantly lower rates. For assistance go here or to Seniors First.
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Even without the compounding interest problem, $12 a month is a lot to charge a pensioner for any financial service.
We couldn’t agree more!! Our friend had a reverse mortgage and had to pay $10 per month. She didn’t understand that compound interest was accumulating on that fee. She was thrilled to find out from Seniors First that there are much better financial products available.