The amount of income banks receive from fees charged to households grew 3% in fiscal year 2009, down from 8% in the previous two years, as banks cut fees to attract deposit accounts from their competitors. However, fees to businesses rose 13% during that time frame, up from 9% in fiscal year 2008 and 7% in 2007.

Figures released last week by the Reserve Bank showed that the banks’ fee income totalled $12.7 billion in fiscal year 2009, a total increase of 9% for both households and businesses. The share paid by households was $5 billion, roughly $11.50 each week per customer.

The largest gains were in the fees charged to:
•    residential mortgages, which increased 17% to $1.23 billion,
•    personal lending, up 14% to $552 million, and
•    credit cards, up 8% to $1.43 billion,
•    as well as those fees charged for business lending.

Mortgage fees were driven by homeowners switching from fixed rate to variable rate loans, to take advantage of the severe cuts in the RBA official overnight rate as the global financial crisis unfolded.

“The increase in housing fee income was driven by establishment and early exit fees,” stated the RBA report. “A number of bank customers chose to refinance their fixed rate housing loans with variable rate loans, given the significant fall in the cash rate during the banks’ 2009 financial year.”

Banks did report a $120 million decline in ATM fees, as credit and debit card holders used the machines less.

Many banks have lowered their fees on retail deposit accounts, to attract deposits from their competitors. The estimate of savings by households with these lower fees is roughly $550 million annually. Fees charged to businesses are expected to fund the shortfall.

Source: http://www.news.com.au/