Govt considers banning bank exit fees

[sparky23]

There is an interesting story in todays news, it appears that the government are not only considering banning bank exit fees but also banning service fees, default fees and penalty fees!

Looks like payback for not passing on all of the interest rate cuts, the bill is going into parliament in June. Maybe this is good news for people stuck on the high interest fixed rates?

 

[evand]

So people who made the wrong call are to be rewarded for their lack of foresight (or greed...or fear...or whatever)?

How much more can the government cover up for the financial stuff ups and ineptitude in society - corporate and private.

Not saying the banks arent the worse gougers around tho.

I pretty much stick with variable as the overall long/ medium term average of variabile rates are pretty much favorable for the borrower. I consider switching to fixed when things look like rasing that average for an extended time.

 

[craigb]

last year i had 2 nasty exit fees,

one was for a 850k low doc exit fee was $47,000 realy crap as i had only two more months before the contract was up!

The other was on a loan for 550k and it was $19,000 and their was no room for negotiations???


Their was my 911 gone! in exit fee's , still feel the pain.

 

[evand]

That's a pretty cheap 911. I think only circa 20 year old ones are in the $60-$70k range.

 

[rugrat]

If the Banks cann't charge their fees, they will find another way tto generate revenue - probably through raising interest rates, and then the majority have to suffer for the minority who want to get out of exit fees.

I'm not conviced this is the way to go.

 

[craigb]

That's a pretty cheap 911. I think only circa 20 year old ones are in the $60-$70k range.

my pref was for the older style 911 convertable it would have, could have been!
But it seems the bank manager wanted it more than me! and had a contract to get it too!

 

[Rolf Latham]

Fixed rate breal cost isnt an exit fee, and the gov cant legsilate against it.

Its like the bank saying to the borrower, sorry mate, cost of funding has gone up, and your fixed rate repayments will need to go up.

There is some reasonable argument for some of the deferred establishment fees being a lot unrealistic woth some lenders, BUT they only represent a small bit of the market


ta
rolf

 

[keithj]

If the Banks cann't charge their fees, they will find another way tto generate revenue - probably through raising interest rates, and then the majority have to suffer for the minority who want to get out of exit fees.

I'd agree with that..... IF it does happen, then the banks will find another way. End result is the govt is seen to be doing something, banks maintain their profits, everyones a winner.... but nothing changes.

 

[sparky23]

My concern is that it could turn into a Govt versus Banks situation which wouldn't turn out well for anybody, as mentioned I think they would then be raising the interest rates regardless of the reserve bank so that would be a bad thing for everybody.

Control over some of those fees would be good though such as the $50 arrears letters, my last one was sent out automatically on the same day as the interest was charged so bad luck if the money was there later in the day.

 

[craigb]

the other day i went to the ATM placed the card in asked for a diplay ballance{$2} then asked for a withdraw {$2} and they came back with Can't service the amount and spat my card out!
i was not very happy with that!

 

[Aaron Sice]

So people who made the wrong call are to be rewarded for their lack of foresight (or greed...or fear...or whatever)?

How much more can the government cover up for the financial stuff ups and ineptitude in society - corporate and private.

Not saying the banks arent the worse gougers around tho.

I pretty much stick with variable as the overall long/ medium term average of variabile rates are pretty much favorable for the borrower. I consider switching to fixed when things look like rasing that average for an extended time.

wait - the govt provides deposit guarantees for the big 4 (5?), practically guaranteeing there'll be no run on the banks, provides all sorts of incentives to banks for not immediately foreclosing on those that are UE - and they have the GALL to withhold IR cuts?

but it's the general public that are in your bad books? last time i checked, it was THE GENERAL PUBLIC'S money suring up the banks, by way of the govt...?

dude...wood for trees.

 

[AUSPROP...]

like my dog of a variable mortgage - the lender won't pass on any rate cuts yet I can't get out because of the horrendous exit fee. This is nothing to do with fixing a rate and then having sour grapes...it's about a lender doing as it pleases by charging whatever variable rate it sees fit and locking you into it

 

[Token Funder]

Like any business that uses capital, a bank needs to make a minimum return on activities. With homeloans you have (a) interest rate margin and (b) fees.

In the old days it was almost exclusively (a).

Nowadays, people focus almost exclusively on the headline rate, often to a quite ridiculous degree, so a lot more of the income comes from (b).

If big chunks of (b) were removed, particularly activity contingent fees including exit fees:

* margin (i.e. interest rates) would increase
* the inability to amortise up front costs in the confidence any shortfall can be clawed back if a borrower leaves early would mean getting it all up front. $3K application fee anyone?
* low touch borrowers would subsidise high touch borrowers.

There is no Magic Pudding

 

[AUSPROP...]

but the beauty of banks in Aussie is they can have whatever they like of both (a) and (b) plus get government backing. happy days!

 

[Perp]

So people who made the wrong call are to be rewarded for their lack of foresight (or greed...or fear...or whatever)?

I agree with regards to people who fixed at high rates. Everybody has to take a position on whether fixed or variable is going to be best for them, and sometimes you'll choose wrong.

Fixed rate breal cost isnt an exit fee, and the gov cant legsilate against it.

Agreed. How could they? The Bank has borrowed those funds for you at that high rate, and I assume they can't get out of their commitment to the funding source, so how can they possibly let the fixed-rate borrower off the hook without making a loss?

 

[BV]

Looks like payback for not passing on all of the interest rate cuts, the bill is going into parliament in June.

I think it's about time.

Currently competition does not work and greed has taken over so some regulation of the banking sector is necessary IMO and if the banks continue on their greedy path more regulation will come.

 

[Invest]

There is an interesting story in todays news, it appears that the government are not only considering banning bank exit fees but also banning service fees, default fees and penalty fees!

Looks like payback for not passing on all of the interest rate cuts, the bill is going into parliament in June. Maybe this is good news for people stuck on the high interest fixed rates?

Oh I pray to God this happens... I am stuck on 8.49% for the next 2 years!!!

Please please please!!!!!!!!!!!!!!!!!!!!!

 

[Dis]

I think fees are ok but they should reflect the real cost of the service provided (inclusive of a reasonable profit margin). This is common in other industries, with reasonable margins ruled on by various bodies (ATO, ACCC, etc)

Banks should not be able to charge fees which are punitive / designed to restrict choice.



Re: Mortgage insurance.
I think there is some reasonable grounds to change the system so it is the borrower (not the bank) who is insured. Should the borrower refinance under the same terms then the MI should travel with him. If terms are slightly different then the insurer can vary the premium slightly (a bit like when you change some aspect for your car insurance).

 

[brickbuybrick]

Can anyone enlighten us as to how the big banks seem to continuously get away with buying out the competition. i always thought there were regulators and strict policies in place to stop these kind of large aquasitions to allow competition in the market place. Bankwest is a recent example. They gained popularity quickly because they were rivaling the banks and now they have recently been bought out by the commonwealth bank. I'm all for our financially strong banks but the way they are going and charging kryptonite wont even be able to stop them.

 

[The_Bludger]

like my dog of a variable mortgage - the lender won't pass on any rate cuts yet I can't get out because of the horrendous exit fee. This is nothing to do with fixing a rate and then having sour grapes...it's about a lender doing as it pleases by charging whatever variable rate it sees fit and locking you into it

Who's the lender?