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ISCOVER
By Jessica Darnbrough
Brokers are divided as to whether borrowers will benefit from the federal government’s blanket ban on exit fees.
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Exit fees were officially scrapped last month as part of the government's on-going plan to increase competition between lenders but the move has proved controversial, polarising the industry.
According to The Adviser’s latest straw poll, 57.8 per cent of brokers believe consumers will be better off as a result of the ban on exit fees.
Of the 715 respondents, 42.2 per cent believe the ban will not help consumers find a better home loan deal.
EZY Capital’s director Matthew Watts is one broker that believes the exit fee ban will not benefit borrowers.
Mr Watts said the new law will inevitably widen the competition gap between Australia’s banks and non-banks, which will not benefit consumers in the long run.
“As a result of the new laws, we will see lenders increase monthly management fees and interest rates, which will have no advantage whatsoever to the end borrower,” Mr Watts told The Adviser.
“As for the broker industry, aggregators and brokers operating on “no fee” arrangement, who rely on income direct from lenders only, may see a reduction in income.
"This will be in direct response to the possibility of tougher clawback measures so brokers will have to cross the fingers and toes and hope the borrower doesn’t move lenders.”
But it seems not everyone agrees.
Home Loans Specialist’s Les Scott said the banning of exit fees was “correct and long overdue”.
Mr Scott said the initiative would ultimately benefit customers and help them find the best deal for their needs.
He also said it was disappointing to see industry associations opposing the exit fee ban.
“Suggestions that lenders will recoup the loss of exit fees from other means is a threat which the government should respond to. The government should monitor fees very closely and take action against any lender that tries to recoup exit fees by other fees or charges.
"We already have a number of lenders who don’t charge exit fees and they are surviving very well. I support the government’s initiative in banning loan exit fees as I believe it is in the best interests of everybody.”
