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The federal government has spoken time and time again about its desire to create a competitive lending industry
But if the government really wanted to create a competitive mortgage environment, wouldn’t it want to discuss any legislative proposals with the market they would impact – the non-bank sector?
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Apparently not.
Despite a raft of criticism from this sector, the government decided to push ahead with its proposed ban on exit fees, passing the decision into law last month.
Smartline’s executive director Joe Sirianni said the new laws would “stifle competition” and “really hurt” Australia’s smaller and non-bank lenders.
Aussie’s executive chairman John Symond went one step further, labelling the decision as “an accident waiting to happen”.
His criticisms, however, covered more than just the new law, with Mr Symond branding the Treasurer “arrogant” and “incompetent”.
“We have an arrogant Treasurer who refuses to enter into dialogue,” he said. “The cost of a mortgage will go up as a result of this botched regulation.”
Some lenders have pre-empted the government’s 1 July introduction date and already abolished their exit fees.
CBA abolished its exit fees for new customers, while non-bank lender Pepper and mortgage manager National Finance Club both cut their respective DEFs, overhauling their loan offerings in the process to ensure they deliver a competitive suite of products.
NFC general manager Andrew Clouston said non-bank lenders that did not review their product suite would inevitably be left behind in this increasingly competitive mortgage environment.
“The recent ‘bank wars’ have put pressure on all other financial institutions to follow suit and reduce the cost of borrowing for customers,” he said.
In this respect, it is fair to say consumers will be better off as a result of the government’s ban on exit fees. Isn’t it? Brokers are unsure.
According to The Adviser’s recent straw poll, 56.5 per cent of brokers believe consumers will be better off as a result of the government ban on exit fees.
Of the 648 respondents, 43.5 per cent said consumers would not benefit from the ban in the long run.
So what can we take from the debate?
I think Better Mortgage Management’s managing director Murray Cowan articulated it best when he told me, “We will just have to wait and see. The ban could improve competition, or it could be a complete failure.”
