Mortgage Experts Blog

< back to blog home

Exit fees are officially banned

Marty McDonald - Friday, June 24, 2011

The proposed legislation to ban home loan exit fees was officially passed by the senate yesterday (23/06/2011). There were 35 senators for and 35 against the ban, with the deciding vote going to Senator Fielding who voted in favour of the ban.  It will now become law from the 1st of July 2011. 


What this exit fee ban means in practice:

From the 1st of July 2011 you will be able to fully repay and close your loan without incurring any lender imposed exit fees. This would normally occour when you either sold your property or refinanced your loan to another lender. Adminstration and government fees are not included in the ban so it will still cost at least a few hundred dollars to switch lenders. Fixed rate break costs are also not included in the ban.

Exit fee ban, good or bad for the consumer?

I personally am at odds with most of my fellow mortgage brokers in that I support the exit fee ban as I think it will be good for the consumer.

It may not be good for non bank lenders but really they are such a small part of the lending landscape now that I don't really think it matters all that much. I am all for competition but the non banks were not providing this before the exit fee ban so I don't see how things will change with it in place.

Traditionally non banks lured borrowers into their loans with cheap rates but with very large early exit fees. Nothing wrong with that in theory however what happened in the wake of the GFC with non bank lenders pulling out of the market and then increasing their interest rates well above other lenders proved the model was in my opinion broken. For example borrowers who took out loans through non banks such as Rams, Macquarie Bank and GE were stuck with the choice of paying much higher rates than they should have been or refinancing their loans and paying up to 3% of the original loan balance as an exit fee. For a $500,000 loan this could be up to $15,000. If nothing else this is why exit fees had to be banned in my opinion as there were literally thousands of borrowers in this boat and many still are in this predicament.

So in summary I think the exit fee ban will be good for consumers. Another initiative that I would support would be the portability of bank accounts so we can finally break the inertia that stops so many people from seriously considering changing lenders!

Thanks for reading,

Marty

About the Author: Marty McDonald is principal of mortgage broker “Mortgage Experts”. Marty specialises in assisting active property investors with loan structuring advice and implementation as well as helping credit worthy borrowers with slightly outside the box income and employment situations. Find Marty on and LinkedIn.

What our clients are saying

    "Marty was fantastic! We swore never to use a broker again after bad experiences with other brokers in the past, and our last loan we negotiated ourselves, however this time we needed a mortgage... " – Blake Millgate
    "It is impossible to exaggerate how highly I rate Mortgage Experts and my experience with Marty McDonald... " – Brendan Arlington
    "Mortgage Experts have provided a fantastic experience in an area that can be complicated and emotional. Marty was always clear and precise and always made time to discuss the matters at hand... " – Brett Parker
    "I was really impressed with Marty's services. He was responsive to emails and calls, considered a range of options, and kept me informed at every stage. He was also very patient... " – Elise Darsow
    "Marty was great to deal with. From initial contact to finding a perfect solution and strategy to our situation to then securing the funding in a tight time frame nothing was too much trouble... " – Nick and Blaise Porter
    "Great service! All the advice I've received in the past has been really helpful. Love the newsletters which keep me updated on developments in the market. Highly recommended! " – Nick Jolly
    "I have used Marty's mortgage brokerage service (Mortgage Experts). He has been professional, resourceful, gone beyond the call of duty in servicing my mortgage. He has been able to... " – Prithvi Moses
    "We’re both really happy to have been able to get this sale across the line and are particularly grateful for you finding us a way to make the finance work! Walking into our new home... " – Sarah Macdonald & Stewart Bovell
    "We found Marty McDonald from Mortgage Experts through a Google search because he had a hugely informative page about family trust loans. Choosing Marty as our broker was a huge blessing... " – Tracey Cools

Our Current Lender Panel

Lex Luther Enterprises Pty Ltd (ABN 58114636949) trading as “Mortgage Experts” is an Authorised Credit Representative (444479) of Martin Warren Thomas McDonald, Australian Credit Licence (391230) under s64(1) of the National Consumer Protection Act 2009.