After months of build-up, exit fees have officially become a thing of past. And as predicted, some lenders are simply jacking up upfront fees to make up for the shortfall.
Smaller lenders such as Aussie, the Greater Building Society and ME Bank are increasing upfront home loan fees and discharge fees in response to the ban, according to Mozo.
Aussie is increasing fees on its fixed rate home loans by $185 from today. This includes a $100 application fee increase, a $50 settlement fee increase and a $35 increase to its discharge fee.
Meanwhile, the Greater Building Society is introducing a $500 application fee on all its home loans from 1 July, and ME Bank is adding a new $150 legal fee and $150 valuation fee to its home loans - increasing upfront fees by a total of $300.
Mozo managing director Rohan Gamble predicts more smaller lenders will increase upfront and administration fees on home loans over coming weeks to recoup lost exit fee revenue.
“It’s significant that these increases are being driven by smaller lenders and mutual societies, while the big banks, who are normally the first to move on price increases, have not moved an inch. This seems to confirm fears that smaller lenders will be most hurt by the exit fee ban and will need to reprice their loans accordingly.”
The major banks appear to be using their power to further dominate the home loan market – offering discounts for customers switching loans, and rate cuts.
ANZ announced this week a $1000 offer towards the cost of switching your home loan to its Simplicity Plus or Breakfree Package mortgages. The offer includes a waiver on the application fee for Simplicity Plus, which saves customers $600, and a $375 waiver on the Breakfree Package fee (for the first year only).
In addition, ANZ has reduced rates on its Breakfree standard variable rate loan by 80bps and 15 bps on fixed rates until the end of September.
CBA also cut rates on its recently launched “no fee” home loan – shaving it down from the already discounted rate of 7.24% to 7.11%.
Meanwhile, NAB is continuing its “break-up” campaign – offering to pay fees incurred by borrowers if they make the switch and giving them a cheaper interest rate. It is also offering a competitive rate of 6.59% through its online banking business UBank for borrowers looking to refinance. The package comes without application or administration fees.
Westpac has announced cuts to its fixed rates on Home and Investment Property Loan for two to 12 years. The two- and three-year fixed rate products will drop by 20 bps, while the four- to 12-year products have been cut by 10 bps.