Legislation was passed by the Government today banning exit fees on mortgages for all new home loans from 1 July 2011. This is seen as an important day for consumers because one of the biggest hindrance stopping Australians from getting a better deal on mortgages will finally be removed. This critical measure should help boost competition in the home loan market over time, by giving consumers greater freedom to walk down the road if their bank isn’t doing the right thing by them. Exit fees can sometimes be so high that they completely wipe out the savings from switching to a cheaper mortgage with another lender.
This builds on the existing reforms which gave ASIC the power to pursue banks over unfair exit fees on both new and existing mortgages. The regulator is also able to stop banks re-badging an unfair exit fee as another type of charge. Some of the big banks have already abolishing their exit fees, with National Australia Bank even offering to pay exit fees for home owners to switch across from the two big banks that still have the fees in place.
The Government will need to work much harder if it is to give all Australians a fairer go in the banking system.
