Abbott criticises exit fee ban

The introduction of a ban on exit fees imposed by banks on those hoping to switch home loans has been criticised by the federal opposition leader Tony Abbott.

He asserted that banks need to "recoup their costs" when those with mortgages opt out of an agreement, reports the Australian Associated Press.

As of July 1st 2011, financial institutions will no longer be permitted to levy charges against customers that opt to switch when they compare home loans and find a cheaper one elsewhere.

Mr Abbot said: "The problem with a ban, particularly a broad ban, is that it could end up making things even harder for struggling first home buyers."

The move has also been slammed by Phil Naylor, chief executive of the Mortgage & Finance Association of Australia, who told the Australian that "there will be unintended negative consequences for non-bank lenders".

He explained that preventing banks from charging exit fees will reduce the competition from these providers, which could in turn enable larger financial institutions to charge higher interest rates.

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