The federal government’s announcement on 25 March that home loan exit fees are banned from July 1 onwards is causing confusion with a number of borrowers who are trying to decide whether to switch now or later.
Many are unsure whether it will be more beneficial for them to wait until this expiration date passes before committing to a new loan, says Australia’s largest independently-owned mortgage broker.
The answer? Timing isn’t the real issue. Finding the home loan situation that works best depends on the new lender and product they choose to match their financial situation, lifestyle and goals.
Australia’s big four banks may not be as comfortable with a proposed ban on mortgage exit fees as they are letting on, a Treasury official says.
Under the federal government’s proposed reforms to improve banking competition, exit fees on new standard variable home loans would be banned from July 1 this year.
Many small players in the banking sector have expressed concern about the financial impacts of the proposed ban.
By Jill Fraser
At a press conference in Canberra yesterday Prime Minister Julia Gillard addressed a Treasury warning, revealed in documents obtained under the Freedom of Information act, that abolishing exit fees could cost customers more.
PM: The government believes that our moves to increase banking competition, including getting rid of bank exit fees, will get a better deal ultimately for customers, that more competition is good. If the banks go in competing hard for people’s business, then consumers will get better deals and in fact over recent weeks people will have seen major advertising campaigns from the banks out there, offering deals to consumers going in to get consumer business offering better deals as a result.
The federal coalition has seized on internal Treasury documents to dump on Labor’s plan to ban mortgage exit fees.
Opposition treasury spokesman Joe Hockey says the emails from Treasury officials, released under freedom of information laws, prove Wayne Swan isn’t fit to be treasurer.
"The treasurer is now condemned by his own Treasury’s words," Mr Hockey told reporters in Canberra on Tuesday.
Once the dust from the on again, off again big bank relationship saga settles, the Federal Government should have a far clearer picture on the immediate issues required to increase competition in the home loan market.
The current marketing ploys by the banks will not deliver tangible long term benefits for new customers according to Paul Ryan, CEO and Founder of intouch Home Loans, an independent non bank lender.
“The Government needs to understand that just 3 months ago the banks all increased their interest rates significantly above the RBA citing increased cost of funding. Yet in a small space of time they have declared record half yearly profits, increased their net margins and entered into a discount marketing war to attract new customers.”