June 27, 2011
In spite of staunch objection from several non-bank lenders, the Opposition and industry associations, the government’s National Consumer Credit Protection Act ban on mortgage exit fees was passed by the Senate last week and becomes law on July 1, 2011.
Many smaller lenders petitioned the Senate committee to overturn the ban, claiming they would not be able to remain competitive if it came into effect.
The Mortgage and Finance Association of Australia (MFAA) had requested that smaller lenders be exempt from the exit fee ban on the grounds that the fee charged by non-banks was a genuine incurrence. Without that revenue, the MFAA claimed, non-banks would find it hard to offer lower interest rates on home loans, which would in turn result in mortgage interest rate increases across the board.
Shadow treasurer Joe Hockey agreed and told the Senate committee that the Coalition is concerned that the ban hurts consumers by penalising smaller lenders who will now have to recover the costs via higher interest rates and account keeping charges.
On the other side of the fence, NAB defended the new legislation, claiming the ban will stimulate rather than stifle competition. NAB abolished exit fees in December 2010 and also currently offers the lowest standard variable home loan rate of the major banks.
According to the latest Australian Bureau of Statistics data, smaller lenders now have only 1.0 per cent of the housing finance market, down from 13.6 per cent before the GFC. The banks currently have 92 per cent market share.
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