So ANZ announced their decision yesterday as outlined in other threads.
As Marty (I think it was Marty) pointed out, with the increased rate over and above the reserve, ANZ will more than make up for doing away with exit fees of $700, fees that were probably only paid by 30% of mortgagors anyway, will now be paid by everyone via a higher interest rate.
ANZ also announced a discounted 3 year fixed rate loan.
So with the political pressure to get rid of deferred establishment fees, fees that were GENERALLY higher for the non-bank lenders anyway, I think the following consequences will apply:
1. Variable interest rates will be permanently a little bit higher, to make sure the banks recoup the cost of opening a mortgage within the first 12 or 18 months.
2. 3 and 5 year fixed rates will start to become more competitive as banks look for ways to rope clients in for a longer term. This will reduce a clients flexibility to sell, refinance, or pay more off.
3. Broker commissions, or clawback policies, or both, could be adjusted to reflect the costs of clients who refinance ofter.
4. As smaller banks generally charged more for these DEF's, they will potentially be less competitive, i.e. will need to charge a higher interest rate to make up for the reduction in the fee they can charge.
As alway when politics gets in the way of a relatively free market, they make one change, when really the whole system needs to be looked at in total, and then they screw it up.
Just like the tax debacle. 130 changes recommended, they make 2, screw them up, change them to keep a minority happy, then they can't pass it in parliament anyway...
As Marty (I think it was Marty) pointed out, with the increased rate over and above the reserve, ANZ will more than make up for doing away with exit fees of $700, fees that were probably only paid by 30% of mortgagors anyway, will now be paid by everyone via a higher interest rate.
ANZ also announced a discounted 3 year fixed rate loan.
So with the political pressure to get rid of deferred establishment fees, fees that were GENERALLY higher for the non-bank lenders anyway, I think the following consequences will apply:
1. Variable interest rates will be permanently a little bit higher, to make sure the banks recoup the cost of opening a mortgage within the first 12 or 18 months.
2. 3 and 5 year fixed rates will start to become more competitive as banks look for ways to rope clients in for a longer term. This will reduce a clients flexibility to sell, refinance, or pay more off.
3. Broker commissions, or clawback policies, or both, could be adjusted to reflect the costs of clients who refinance ofter.
4. As smaller banks generally charged more for these DEF's, they will potentially be less competitive, i.e. will need to charge a higher interest rate to make up for the reduction in the fee they can charge.
As alway when politics gets in the way of a relatively free market, they make one change, when really the whole system needs to be looked at in total, and then they screw it up.
Just like the tax debacle. 130 changes recommended, they make 2, screw them up, change them to keep a minority happy, then they can't pass it in parliament anyway...
However the materiality of the exit fees expressed as an actual % rate is probably very small, albeit something.
