Home Loan Exit Fees Likely to Go

A last-minute attempt to overturn a ban on home loan exit fees looks set to fail, with a key senator expected to support Treasurer Wayne Swan's bid to lift bank competition.

Independent senator Nick Xenophon and the Coalition are seeking to allow smaller lenders to continue charging exit fees through a disallowance motion that would prevent government legislation from coming into force in July.

If successful, the motion would be a major setback for Mr Swan's attempt to bolster competition between lenders.

But support for the motion in the Senate is likely to fall short of a majority when it is voted on.

It is believed the senator holding the balance of power on this motion, Family First leader Steve Fielding, will side with the government and the Greens, ensuring the ban comes into place.

Senator Xenophon and the Coalition say the ban will severely wound competition because it will remove a key revenue stream for small rivals to the big banks.

A previous study found small non-bank lenders charge average exit fees - a penalty for customers who leave a lender after the first three or five years of a loan - of $1900. However, some lenders charge as much as $7000.

All of the major banks except Westpac have now scrapped their exit fees, which were between $700 and $900.

Senator Xenophon has acknowledged some exit fees are excessive.

He also is proposing separate laws to ban banks with more than 10 per cent market share from charging exit fees.

Latest NewsHome Loan Exit Fees Likely to GoThursday, 25 May 2017

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