Mortgage Exit Fees debate should focus on providing consumers
1 July 2010
The Mortgage and Finance Association of Australia (MFAA), welcomes further government consultation relating to the recent announcement by Deputy Prime Minister on mortgage exit fees.
According to MFAA, CEO, Mr Phil Naylor; “MFAA strongly supports all measures which promote competition in the mortgage industry and enable greater loan choice for consumers.”
“That said, the reality is the issue of mortgage exit fees is multi-dimensional. According to our members, there are industry concerns that any changes to mortgage exit fee structures will further inhibit the ability of non-banks lenders to compete in the mortgage market – thereby impacting the range of services non-bank lenders can provide consumers,” added Mr Naylor.
“It’s important to note, non-bank lenders have been able to offer consumer very competitive interest rates by deferring some of their set-up costs into deferred established fees which are paid only if there is an early termination of the loan. Non-bank lenders were the most heavily affected by the Global Financial Crisis and are still recovering from this significant challenge,” said Mr Naylor.
MFAA will be making detailed submissions in response to the ASIC Consultation Paper 135, on behalf of its non-bank members. This will ensure that while consumers are properly protected, there is no inhibition on competition by disadvantaging non-bank lenders.
Commenting on the recently released ASIC Consultation Paper 135, Mr Naylor said the MFAA is comforted by the comment “that early exit fees, including deferred establishment fees, are generally imposed only to recover the costs which arise from early termination. If this is the case and the fee is reasonable, we think the fee will generally not be unconscionable for the purposes of s78 of the Code.”
