The government's exit fee ban has done nothing to encourage lender competition according to one industry figure.
In a submission to the Senate inquiry into the post-GFC banking sector, MFAA chief executive Phil Naylor has pointed to figures he says demonstrate the failure of the government's ban on exit fees.
While Naylor said refinancing increased from the announcement of the exit fee ban, he argued that smaller lenders did not see benefits from the uptick.
"Bank market share figures suggest that there was no negative impact of refinancing on the major lenders as the market share of major lenders actually increased between October 2010 (73.5%) and March (75.7%), June (76.3%), July (76.5%) and December 2011 (76%), as well as January 2012 (75.8%) and March 2012 (75.6%). This was despite, or perhaps, because of, the publicity campaign from the government and banks encouraging borrowers to switch," Naylor told the Senate inquiry.
Naylor pointed to previous MFAA/CBA Home Finance Index results, showing that, of those who refinanced in 2005 - well before the ban on exit fees - 80% said they had benefited from the change. By contrast, a survey in September 2011 found only 64.3% of refinancers felt they had benefited by switching lenders.
"Clearly over the period 2005 to 2012, the percentage of all mortgage holders refinancing has not changed materially, but the proportion of those saying they had benefited from the refinance has dropped significantly by 2012 compared with 2005 and 2006," he said.
"The ban on exit fees has brought about no improvement in industry competition and has merely reinforced the dominance of the major banks and depleted the force of the smaller and non-bank lenders. Clearly the solution to the lack of competition does not rest in banning exit fees," Naylor added.