Exit Fee Ban - Out with the old, in with the new
Article by Mozo
Less than two weeks ago the government’s ban of home loan early exit fees was officially introduced. Cue the celebrations…
OK, so we’d understand if you weren’t moved to rapturous applause, as it seems the old adage of ‘one step forward, two steps back’ is right on the money.
Taking the sheen off the positive effect of the ban on early exit fees (EEF) is the alarming news from the nation's lenders of new fees and rising rates.
It is still early days, but the Mozo Rate Chasers have already counted 13 lenders who have raised fees, interest rates or both since the ban. In many cases, these equate to cost increases above the original exit fees.
The average fee increase to date has been $310, ranging up to $650 for a new application fee.
Fee and rate increases are being driven exclusively by smaller lenders, who are being forced to find new ways to cover their costs (whilst the Big Banks can sit pretty). Of course, this result is totally at odds with the objective of the EEF ban, which was designed to increase competition amongst lenders.
But it’s not all doom and gloom, with two thirds of lenders removing EEFs last week and not lifting other charges (yet!). As always, the Rate Chasers at Mozo HQ will watch this space carefully and keep you up to date.
Would a big upfront fee put you off a home loan? Tell us what factors you consider when choosing a loan and you could win $50!
— — -
Exit Fee, Exit Schmee
We’ve said it before, we’ll say it again – fees on home loans, no matter how chunky they may seem on paper, are no match for a great interest rate.
Over the life of a $300,000 loan repaid over 25 years, a difference in interest rate of only 0.1% will add almost $6,000 to the total repayment cost.
- Health check your loan right now and find out exactly what you could be saving!
- Make use of comparison rates: lenders have to show them, and they take all fees and rates into account