The ban on exit fees for mortgages does not do enough to promote full mobility for consumers, believes a major mortgage franchise.
In its submission to the Financial Systems Inquiry, franchise Yellow Brick Road said while banning exit fees was a “step in the right direction”, more needs to be done.
It said mortgage discharges should be completed within fourteen days, and it is only due to lack of regulation that lenders are dragging the process out.
“The current lack of regulation with respect to mortgage discharge allows lenders to hold onto a mortgage for a lengthy amount of time, despite the customer switching mortgage providers. This is contrary to the wishes of the customer and legislation should be introduced to better regulate this conduct.”
YBR referred to the Senate’s inquiry into banking competition, which concluded delays in lenders effecting transfers of mortgages was concerning consumers.
One of the private submissions to that inquiry said regulations should be put into place to make sure the bank settles the transfer of a mortgage from one bank to another within a maximum of 21 days of the date notified by the customer.
There should be no impediment to this as titles for properties exist electronically and on paper and the existing customer bank holding the title should be readily able to produce the physical title document, match it with the transfer signed by the customer, and transfer the title to the new lender within this period, the submission said.
YBR believes 14 days is sufficient time for lenders to be able to arrange transfer of the mortgage in accordance with what the customer wants. A standardised form should be used and a process established by regulation, it suggested.
CEO Matt Lawler said YBR’s submission calls for changes to the system in order to support the two Australian dreams – to own a home and to retire comfortably. The company opened up its draft submission to the public, giving consumers a two month period to make contributions and comments via its website.