April 4, 2011
As part of the federal government’s overhaul of the banking sector, Treasurer Wayne Swan recently announced a ban on mortgage exit fees as of July 1, 2011. Australia has the most expensive exit fees in the world, averaging around $1500 and sometimes up to $7000, compared to $400 in the UK and around $550 in the US.
While the move is designed to encourage competition in the mortgage arena, what do the new rules mean for borrowers?
- The exit fee ban covers variable interest mortgages, and applies only to loans taken up after July 1. All banks are banned from making it prohibitively expensive for customers to switch to a cheaper loan.
- The regulation is aimed at combating expensive exit fees that may wipe out any savings which might come from taking out a loan on lower interest or better conditions.
- ASIC also is now able to prevent banks from hitting customers elsewhere by re-badging unfair exit fees as another type of charge.
- The government is launching a ”government-protected deposits” symbol to reassure customers their money is just as safe with credit unions and building societies as it is with the big banks.
- Under the changes, the ACCC will have the power to crack down on price signalling, an anti-competitive action whereby the banks publicly announce their intentions to lift interest rates.
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