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(Apr 08, 2011) On March 23, 2011, the Australian government promulgated a regulation that will prevent lenders from charging mortgage exit fees. (Press Release, Hon. Wayne Swan MP, Exit Fee Ban – A Victory for Australian Families (Mar. 23, 2011).) The measure is aimed at allowing borrowers to exit their mortgage in order to obtain better interest rates or conditions from another lender. Currently, exit fees may reach as high as AU$7,000 (about US$7,320), which may negate any benefit that could be obtained from switching lenders. (Malcolm Farr, Mortgage Exit Fees Officially Banned, THETELEGRAPH.COM.AU (Mar. 23, 2011).)
The government stated that the ban on exit fees will "help boost competition in the home loan market over time" as consumers will be able to easily change to a different bank or other lending institution if their current one is not offering a good deal. (Press Release, supra.) Some of the major banks had already abolished exit fees prior to the new regulation's enactment. However, some smaller lenders have stated that it will lessen competition because they will be forced to reintroduce higher establishment fees and interest rates to cover costs, and the larger banks will be able to take advantage of this. (Peter Ryan, Small Lenders Rail Against Exit Fee Ban, ABC NEWS (Mar. 24, 2011).)
The Australian Securities and Investment Commission (ASIC) already has the ability to investigate and prosecute banks in relation to unfair exit fees applied to both new and existing mortgages. The ASIC can also prevent banks from labeling an unfair exit fee as another type of charge. The official ban on exit fees will apply to all new home loans taken out after July 1, 2011. (Press Release, supra.)
- Author: Kelly Buchanan More by this author
- Topic: Banks and financial institutions More on this topic
- Jurisdiction: Australia More about this jurisdiction
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Last updated: 04/08/2011