Could high exit fees be illegal?

By |
The exit fees charged by some lenders may be illegal, according to a report published by the Melbourne Law School's Centre for Corporate Law and Securities Regulation.

The research paper, which examines exit fees for variable rate mortgages, is arguing that the average fee charged by lenders that are non-authorised deposit taking institutions (ADIs) dwarf those of other institutions. The report estimates that the average exit fee charged by a non-ADI for a $250,000 variable rate loan terminated within three years totals $1,900, in contrast to the rates charged by large banks ($680), other banks ($589) and credit unions ($420).

It adds that these high exit fees could even be illegal, as the charges levied may exceed ‘a reasonable estimate of the credit provider’s loss arising from the early termination or prepayment’ as stated in the Consumer Credit Code. They may also be in breach of the responsible lending requirements contained within The National Consumer Credit Protection Act 2009.

The report concludes that the compulsory licensing regime brought in by the Act may exert downward pressure on exit fees so that they accurately reflect credit providers’ actual losses, as has been the case in the UK. Even so, the report still calls on ASIC, which has responsibility for consumer credit under the Act, to issue guidance about how exit fees charged by a credit provider should be calculated.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Top Suburbs : kariong , alexandria , harris park , ropes crossing , westmead

go back

Get help financing your investment

Do you need help finding the right loan for your investment?

When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here