Aussie Home Loans founder John Symond has renewed calls to scrap the Federal Government’s proposed ban on mortgage exit fees, stating that the ban will decrease competition and could result in higher interest rates on home loan products.
“With exit fees being banned, consumers may well find themselves in a position where they will have to pay costly loan application fees or possibly higher interest rates, as the majority of lenders will need to recover their costs,” said Symond.
The costs that hit smaller lenders, says Symond, include valuation and legal fees – which are usually charged by third parties – while larger banks are in a better position to recover their upfront costs from home borrowers by cross selling other financial products.
“It is possible that the banks will carry the costs and watch the smaller players become less competitive over the next couple of years. Then, in a less competitive market, they may well lift interest rates,” said Symond, adding that the banks also benefit from government savings guarantees and wholesale funding guarantees.
“It has been the non-banking industry over the last 20 years that brought competition to the mortgage market and forced rates down. The Federal Government’s ban will go a long way to undoing that good work by making it harder for smaller players to compete,” he concluded.
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