Mortgage fee ban brings unforseen changes
(6 July 2011 – Australia) Last Friday, 1 July, mortgage exit fees were banned by the government, however already there have been unforeseen consequences.
The ban on exit fees on loans taken out from July 1 is the long-promised crackdown after lenders cut rates by less than the Reserve Bank on the way down and hiked them by more on the way up.
The problem is that while the big banks bore the brunt of negative publicity for interest-rate shenanigans, they weren't the worst culprits when it came to exit fees.
Far more at fault were smaller – often non-bank – lenders. Indeed, non-bank lenders actually invented a penalty euphemistically called a 'deferred establishment fee' to allow them to compete with the big boys.
Now that these lenders can no longer rely on this revenue to replenish their coffers if they lose a loan, they're falling over themselves to re-price their products.
New application fees apply with Greater Building Society (A$500 on all loans), Heritage Building Society (A$600 on basic and fixed loans) and B&E (A$650 on all loans). And Aussie lifted fixed-rate fees by A$185 (across application, settlement and discharge fees). Meanwhile, ME Bank introduced a A$150 legal fee and A$150 valuation fees on all loans.
The problem is that while the big banks bore the brunt of negative publicity for interest-rate shenanigans, they weren't the worst culprits when it came to exit fees.
Far more at fault were smaller – often non-bank – lenders. Indeed, non-bank lenders actually invented a penalty euphemistically called a 'deferred establishment fee' to allow them to compete with the big boys.
Now that these lenders can no longer rely on this revenue to replenish their coffers if they lose a loan, they're falling over themselves to re-price their products.
New application fees apply with Greater Building Society (A$500 on all loans), Heritage Building Society (A$600 on basic and fixed loans) and B&E (A$650 on all loans). And Aussie lifted fixed-rate fees by A$185 (across application, settlement and discharge fees). Meanwhile, ME Bank introduced a A$150 legal fee and A$150 valuation fees on all loans.
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