Exit fee ban a clear failure: MFAA

by Adam Smith13 Jun 2012

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.


  • by Lee 13/06/2012 9:22:02 AM

    It gave lenders an ability to extend or introduce claw backs with "justification" - and i use that term quite lightly

  • by MFAA Bad Decision 13/06/2012 9:24:34 AM

    Well this is certainly a surprise to no-one! What Swan did with exit fees, was for new loans only from when the ban started not on existing loans which would have helped borrowers significantly. Another example of the lack of understanding by this government.

  • by Incognito 13/06/2012 9:24:59 AM

    I was opposed to the exit fee ban and wrote to my local federal member back then.

    Since it's been in though I feel that lenders can no longer afford to get out of line with rates or customers will just say 'switch me'.

    So in the end it's saving me work because the majors are all competitive and my clients stay put.

    I know it's more complex than that, but that's been my experience so far.