The Government called it a “victory for Australian families” when mortgage exit fees were abolished on all new home loans since 1st of July 2011 as a measure to promote competition in the banking system.
The smaller lenders will now compete vigorously by offering cheaper interest rates, and the pressure will keep the rates low at the big banks so they don’t lose their customers. These smaller banks and building societies are a safe alternative due to stringent regulations and government backing.
Many clients don’t realise just how significant the savings may be if they are prepared to switch banks. Amongst the respondents in our recent Home Loan Survey the average home loan was $450,000 and the difference between the highest and lowest rate being charged was 1.2%. This equates to almost $5,500 per year more in interest repayments. We recently saved a client over $6000 per annum in interest by refinancing their loan with a more competitive rate.
Removing exit fees has been a small but critical step in removing the main financial deterrent to switching lenders for a better deal. But it is up to us to make the most of our new found freedom.
Patricia Williams is a credit representative (400458) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237).