AUSTRALIA’S non-bank lenders have fired a new shot in their campaign against the planned abolition of mortgage exit fees, due to take effect on July 1.
Phil Naylor, chief executive of the Mortgage & Finance Association of Australia, said yesterday that non-bank borrowers were much less concerned about exit fees than the government suggests.
“They didn’t consult with our industry and it’s clear that there will be unintended negative consequences for the non-bank lenders,” Mr Naylor said.
He noted that non-bank lenders’ share of the Australian mortgage market had dropped from about 15 per cent before the global financial crisis to “almost nil” now and said the abolition of exit fees would reduce it further.
As part of a campaign against bank charges the federal government has moved against exit fees, but the small end of the market has been using those fees to help keep interest charges down.
Mr Naylor said a new MFAA survey of 1000 householders had concluded that only 1.7 per cent of respondents rated exit fees as important, compared with 50.2 per cent who said the interest charged was most important.
Non-bank lenders attract borrowers by offering lower interest rates than the big banks, but their margins are significantly slimmer because they also pay higher rates for funds than the big banks do.
“One of the positive effects our industry has on the market is to stop the big banks charging higher rates,” Mr Naylor said.
“If exit fees are banned, it’s just going to make it that bit harder for us to compete.
“Banning exit fees will not boost competition among mortgage lenders because it will act against the most competitive component of the mortgage market, the non-bank lenders.”
He noted that the Senate Economics Committee had called for ASIC’s exit fee guidelines to be evaluated before any bans are implemented, and that small lenders should be exempted from the ban.
“The ASIC guidelines had been released only three weeks before the government announced the ban,” he said.