Exit Fees Banned

July 1, 2011 | Comment 0

Starting today, Loan exit fees are banned. This includes low doc loans.

This new measure has been designed by government to make home loans more competitive..

“Part 7-2A ‘Prohibited credit fees and charges’ of the National Consumer Credit
Protection Amendment Regulations 2011 (No. 2) prohibits charging customers
termination fees if a credit contract is entered into on or after 1 July 2011.

Some non banks were charging very high loan exit fees, such as 1 or 2% of the original loan amount. They were so high they wiped out any savings consumers might get from switching to a cheaper home loan with a new lender.

Of course new loans, including low doc loans will not have loan exit fees, however there are a lot of low doc loans out there with deferred establishment fees already in place.

This increased competition will make it easier to switch to a better home loan deal if you become unhappy with your current home loan.

It means more financial choices and if lending institutions introduce unfair fees they can be fined.

For more information see the government home page of Banking Reforms.