Exit fees not a big issue – Brian Rowe

Iden Money Director Brian Rowe said today that he didn’t consider exit fees to be a major issue for borrowers provided the borrower carefully weighed up the advantages and disadvantages of loan products prior to settling on one.

Most lenders continue to have exit fees, some larger than others. Under the new ASIC guidelines the fees are not outlawed but must be justified.

It has been widely reported that non banks have higher exit fees than many of the banks however in most cases this is a symptom of the system in which non banks work. Exit fees charged by non banks are mostly put in place to cover the fee paid to the broker who wrote the loan, if the loan discharges in the first 4 years. Often, this fee reduces as time goes by and the lender has earnt margin income on the loan. Once the loan has run for a pre determined period the fee is no longer charged. This may not be the case with banks, who may charge a non reducing, pre-set exit fee out to 5 years. Read More »

Be careful what you wish for on exit fees

It looks so obvious. And easy. Abolish, reduce or limit so-called ‘exit fees’. What you pay to terminate your mortgage early. But usually payable, only very early, like in the first four years of a mortgage.

It might appear to get to the heart of the problem. You are unhappy with Bank A putting up its mortgage interest rate; you want to move to Bank B; but that exit charge might wipe out the benefit.

So if there’s only a low exit fee, or better still no exit fee, people will be — literally — free to move.

To, as the prime minister creatively put it, take their money and go elsewhere. Actually with a loan, it’s not your money. Read More »