Lenders take different paths on exit fees

While niche lenders make a last ditch bid to derail the Government's plan to ban mortgage exit fees, a number of lenders have cut their fees. There are plenty of others that are waiting to see how the debate over exit and early termination fees plays out.

According to Infochoice data, since the beginning of May Commonwealth Bank, Queensland Teachers Credit Union, State Custodians Mortgage Co, Rams Home Loans, Hemisphere Financial Solutions, Illawarra Home Loans, Homeloans Ltd, QuickDirect, loans.com.au, Citibank and Resi have removed their exit fees.

Some lenders, including National Australia Bank, Teachers Credit Union and Bankstown City Credit Union, dropped their exit fees earlier in the year.

A number of mortgage managers and broking groups cobbled together funding at last week's convention of the Mortgage Finance Association to pay for an advertising campaign that began yesterday in The Australian. A related website and social media campaign are also underway under the handle "keep exit fees".

Supporters of exit fees hope to persuade a majority of the Senate to ovetrturn the regulation next week.

The Senate Economics References Committee recommended in its report competition in the banking industry, published last month, that "the Government reconsider its decision to ban exit fees."

The Committee said rules banning unfair exit fees, formulated by the Australian Securities and Investments Commission in its new role as consumer credit regulator, should be tried before any other action was taken.

Some lenders are hedging their bets. In April Aussie changed its exit fee from a flat $965 for loans paid out within five years to a sliding scale that starts at $1500 in years one and two, and ends up at $500 in year four.

Homeside - a brand of National Australia Bank - cut its fees from $1200 to $600.

Others are waiting until the final hour. Westpac's $700 fee is still in place, as is St George's $1000 fee, AMP's $1000 fee and Suncorp's $800 fee.

The Infochoice database lists Bank of Queensland with a fee of 0.5 per cent of the original loan amount if the loan is paid out within four years. The fee works out to $1900 on an average mortgage of $380,000.

Mortgage House is still charging between $1500 and $4500, depending on the loan product.

RateBusters is still charging 1.2 per cent of the original loan amount if the loan is paid out within three years.