Exit fees on mortgages removed

[tess85]

From today's SMH:
Borrowers free to walk as exit penalties outlawed

"HOME BUYERS will be free to switch banks without penalty as the federal government outlaws exit fees on mortgages.

Treasurer Wayne Swan will announce a big overhaul of the industry today, also empowering the Australian Competition and Consumer Commission to crack down on banks if they try to send price signals to one another to keep their interest rates collectively high.

The changes will come into effect from July1."



I'll be calling up the retentions department and wrangling for more of a discount on my loans now, as it will be cheaper to switch banks...

Any thoughts?

 

[Rob G.]

Why do you think things will be better ?

All the banks will do is either increase rates (limit discounts) or else raise their lending criteria.

Locking-in reduces risk and enables better discounts.

Why do you think phone companies give better rates on a long term plan ?

Its hardly going to increase lending, merely uncertainty for lenders.

Cheers,

Rob

 

[hobo-jo]

All the banks will do is either increase rates (limit discounts) or else raise their lending criteria.

Locking-in reduces risk and enables better discounts.

+1

I've heard that some institutions will only break even (and start making a profit) at the 12-24 month point of a home loan, so if the customer is breaking out of their loan contract before that or even shortly after that why shouldn't they be able to recoup costs. Read the contract, if you don't like the break costs then go elsewhere. Agree Rob G, the $ will be recouped elsewhere, punishing EVERYONE instead of just those that don't do their due diligence.

 

[VIC Lender]

Don't get too excited. Might be another one of Labors stuff ups...

Firstly: NAB and ANZ (or maybe wpac) had already removed their DEF (deferred establishment fees)
Secondly: The major banks were amongst the cheapest DEF in the country.
Thirdly: Non banks that had the highest DEF may still be able to hold on to these fees.

Keep in mind many non-banks mortgage insure every loan - not just loans over 80%. To remain competitive they load the premium in to an exit fee rather than charge upfront to the client.

This article has no detail on the rules and loopholes. The industry talk over the last couple have weeks has been that the ban apply to exit "penalties" rather than "real costs" passed on by the lender.

Therefore non banks can still pass on their "costs" which are a lot higher than the banks.

Just like NCCP; if Mr Swan is not carefull his shotgun approach to competition will just kill off the smaller players and benefit the majors.

 

[Rolf Latham]

What Vic said

Someone will pay somewhere.

The borrowers that most often "need" to look at switching are stuck with LMI.........

A little more consultation with consumer groups might have been useful before coming to such conclusions.

Defs have usually not been the major barrier to refinance unless u got stuck ith a RHG 2 or 3 %

ta
rolf

 

[Alex P Keaton]

hiya, that link doesn't work. Would you be able to please edit your post, thanks

Borrowers free to walk as exit penalties outlawed

 

[Bigtone]

how stupid is this govt?

or maybe they don't care about the actual effect of their action as long as the perception is they have 'smacked those bad banks"!

NCCP, positive credit reporting, banning exit fees

all terrible efforts at addressing the issues.

do they consult anyone at all in the industry or just do some random phone polling of what would be popular?

 

[wobbycarly]

Agree with everyone else. Saw this on the front page of the Herald Sun and scoffed loudly. Wife always gets worried when I scoff loudly!

 

[bluestorm]

how stupid is this govt?

or maybe they don't care about the actual effect of their action as long as the perception is they have 'smacked those bad banks"!

Well Bigtone, you are talking about the Labor government. Most of their policies have been put in without much thought.

Ultimately, the banks always win. They probably already knew this was coming from the Labor government. It probably takes a fraction of the 0.45% rate increase last month to already cover this cost. So everyone pays a little extra to cover the small percentage of lost exit fee revenue and added switch risk that may have occured across a loan book.

Labor wins, banks win. The silly Labor lemmings loose again (and thank Labor).

 

[HomeBuyAU]

So with the banks that have already taken out the exit fees, do these apply for current loans or only new ones?

 

[bluestorm]

So with the banks that have already taken out the exit fees, do these apply for current loans or only new ones?

I believe that this will only apply to new loans drawn up, not on any existing ones. The banning of exit fees would not fully take effect until July 1, 2011, (after legislation passes) although some institutions may get rid of them earlier.

 

[VIC Lender]

So with the banks that have already taken out the exit fees, do these apply for current loans or only new ones?

I think you will find they are only proposals at this stage. Swan is going for browny points at this stage by announcing reforms however they still need to be studied, go through parliament, get supported and be introduced.

Sounds like they are aiming for mid 2011 however will not include loans already in place.

 

[Bradsdad]

Another kick in the teeth for the broker network. Brokers now stand the risk of increased clawbacks and, should this happen, most likely will need to charge for thier services. I fail to see how the consumer wins out of this.

The governments move seems to be a kneejerk reaction to dumbass current affairs programmes and their one sided bank bashing.

 

[HomeBuyAU]

I believe that this will only apply to new loans drawn up, not on any existing ones. The banning of exit fees would not fully take effect until July 1, 2011, (after legislation passes) although some institutions may get rid of them earlier.

Even after July then from what I understand current loans will still have the same high exit fees. Best idea then is just to get out of the loan and cough up the current high exit fees once the bank you want to go with has taken out their exit fees so you have flexibility to move anytime in the future.

 

[wobbycarly]

Another kick in the teeth for the broker network. Brokers now stand the risk of increased clawbacks and, should this happen, most likely will need to charge for thier services. I fail to see how the consumer wins out of this.

The governments move seems to be a kneejerk reaction to dumbass current affairs programmes and their one sided bank bashing.

Wow! Who'da thunk it?

 

[jonmardell]

this is a troubling move by the government cause over time you will see the increase in upfront costs so it really is not going to be free to move to another lender. The banning of exit fees is going to increase the majors market share as the smaller lenders will not be able keep their current pricing without their hefty exit fees. An example is ratebusters which attracts huge exit fees but has a slightly cheaper rate then the majors. The reason they have an exit fee is i assume they mortgage insure the loan not matter what the lvr so their costs are substantially higher then the majors who only insure above 80%. So the only thing that is going to give here is the smaller lenders who have to insure everything is their rates will increase substantially to possibly more then the majors and then when you compare the product offerings from a major to a smaller lender most are going to choose a major for convenience of branches if everything else is par.

 

[csc2]

Another kick in the teeth for the broker network. Brokers now stand the risk of increased clawbacks and, should this happen, most likely will need to charge for thier services. I fail to see how the consumer wins out of this.

The governments move seems to be a kneejerk reaction to dumbass current affairs programmes and their one sided bank bashing.

What rubbish............Anyone such as yourself are self interest people.............nothing more....

The consumer has been scammed for long enough in all areas of loans, money lending, credit cards and brokers who skim the cream to boot..

Hopefully this will be a new era for consumers over the next 20 years as these laws come into play....

Early days yet and its most welcome!

Why didnt this happen when the Libs were in power for 10 plus years????

Now they are crying foul about the ideas being implemented...

Bugger the banks and the brokers............about time this industry had a level playing field.....still a long way off however but at least this is a start....

Really pathetic stuff to think that this is not a step in the right direction...

 

[jonmardell]

Bugger the banks and the brokers............about time this industry had a level playing field.....still a long way off however but at least this is a start....

Considering you have asked questions here of brokers for free, do you think this comment is unfair? I have been in this industry for 8 years and can tell you that i have not met many brokers that do it for the money cause most of them dont really make a lot for the effort they put in.

 

[HLE]

This is just rediculous. Politically motivated policy with no thought for it's actual effects. "Well done"

 

[Bradsdad]

What rubbish............Anyone such as yourself are self interest people.............nothing more....

The consumer has been scammed for long enough in all areas of loans, money lending, credit cards and brokers who skim the cream to boot......................................

..

:.....nothing more...." you say? You don't know me from a bar of soap. Some of us actually take pride in what we do and enjoy it. I could be earning twice as much working for a lender direct and not have to worry about driving all over the countryside meeting clients.

My point is that I don't like the Fee for Service approach and have never done so. I could go into more detail where I have assisted people even when I haven't written a loan for them but don't need to justify myself to you.
Who loses out with a Fee for Service approach? The Borrower!!!
Are we blind enough to believe that the major players in the lending market won't re-coup these fees elsewhere? Of course they will as they are governed by shareholders and they must get a return on their investment.
Let's jusy hope that the "average Joe" doesn't fall into the trap of refinancing every 3-12 months to save 5-10 basis points. They'd be lucky to cover the cost of Mortgage registration/discharge fees & lenders settlement fees.

Hmmmmmmm settlement fees........ How long until these increase?

I guess to make things even cheaper to move loans the registration and discharge fees on Mortgage documents could be abolished. I'm sure taxes wouldn't be increased elsewhere to re-coup this cost.