News and Media

Mortgage exit fees officially banned

From 1 July, the Australian Government officially banned mortgage exit fees on new loans.

What are exit fees?

Also known as 'early termination', 'early discharge', 'deferred establishment' or 'deferred application' fees, exit fees may be charged by a lender when a consumer wishes to pay their off home loan in full within a specified date range (e.g. within the first five years).

Why are exit fees being banned on new loans?

Typically, exit fees are thousands of dollars; wiping out any savings you might gain from switching to a new loan with a different lender. By banning fees on new loans, competition in the home loan market will be boosted in the long-term, giving consumers greater freedom to negotiate a better deal.

Why is the ban only being applied to new loans?

The Australian Government cannot ban fees on existing contracts. However, some lenders have already removed exit fees on home loans while others are offering to pay your exit fees if you switch; so it pays to shop around.

Won't lending institutions just charge another fee?

As part of its new banking reforms, the Australian Government has given the Australian Securities and Investments Commission (ASIC) the power to take action against any lender that seeks to re-badge their current mortgage exit fees as upfront entry fees, or charges an early exit fee which is considered unfair or unconscionable by a consumer.

Where can I get more information?

For more information about home loan fees and to access a loan switching calculator, visit www.moneysmart.gov.au.

For more information about the Australian Government's banking reforms, visit www.bankingreforms.gov.au.

Source: Australian Government. Australian Banking Reforms Website http://www.bankingreforms.gov.au/content/Content.aspx?doc=home.htm.