What drives mortgage fees in Australia?

Abstract

We investigate the factors that affect total, ongoing and origination fees of mortgages in Australia during the period 1996 to 2011. We find that banks charge significantly higher total and ongoing fees than mortgage corporations although they require lower origination fees. We also find that fee levels are dependent on loan size, loan-to-value ratio and loan features like term of the loan and presence of an offset account. Further, we confirm that lenders tradeoff higher (lower) interest rates with lower (higher) fee levels. Finally, our results show that mortgage fees are significantly affected by market conditions