Exit fee changes could hurt competition: MFAA
By
Andrea Cornish
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2/07/2010 5:55:00 AM
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5
comments
Non-banks stand to lose the most from changes to exit fee structures, according to the MFAA.
While the industry body said it supports any changes that promote competition in lending, it pointed out that many non-banks offset cheaper rates with deferred establishment fees.
“The reality is the issue of mortgage exit fees is multi-dimensional,” said chief executive Phil Naylor.
“It’s important to note, non-bank lenders have been able to offer consumers very competitive interest rates by deferring some of their set-up costs into deferred established fees which are paid only if there is an early termination of the loan. Non-bank lenders were the most heavily affected by the global financial crisis and are still recovering from this significant challenge.”
The government is currently consulting with the industry on the issue of exit fees in a effort to boost competition by making it easier for consumers to switch loans.
Latest Comments
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5
comment(s)
Chris on
02 Jul 2010 02:55 PM
These type fees were initially brought about by refinancing the same loans over that fair to say the Funders wore the costs. I think we and the public are prepared to accept a fair early termination payment that covers costs ie. one that clearly does not facilitate a profit grab or a punishment to the customer just because they pay out the loan for any reason. Dont forget, the majority also clawback Broker commission so they are getting it back both ways. I''m all for competition but if non Banks have to charge such a high fee to participate, should they really be in the market because what they are saying is that if the customer does not pay out the loan ahead of time, they have lost money for the whole term of that loan - rubbish. They and Investors would not put up with that. Its the unfair early repayment fees as a % of the initial loan for the full term of the loan (not just the 1st 1-5 years) that are unfair eg. La Trobe business & investments loans where they charge a % of the loan for the full 5,10,15,20, 30 year term - not picking on one in particular - there are others too. I am hoping the new legislation will clean up this part of our market. They will still be able to compete and make a profit.
Robert Kaya on
02 Jul 2010 06:26 PM
In this case why don''t the non-bank lenders charge their fees "Upfront" in order to compansate their potential losses?
Peter on
03 Jul 2010 10:47 AM
It is ok to say that non bank lenders offer cheaper rates at times but with excessive exit fees whats there to stop these lenders hiking up rates & with the high break costs consumers are locked into the lender until the exit fee term expires.
Angela Gorham on
05 Jul 2010 12:02 PM
We have seen from past experience that non banks and mortgage managers have lifted rates more than the market. They know their exit fees make it restrictive to refinance. I appreciate some of it cost of funds realted but is some of it profiteering and gouging additional margin? A big risk to go non bank i say.
Allan Faint on
09 Nov 2010 12:56 PM
Rather than worrying about the early payment penalties why not insist LMI premiums can be rolled over with the loans, rather than clients having to pay that over and over again? It is not just the Majors making a fortune, how about the insurance companies