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ASIC to unveil exit fee rules

In a bid to improve competition, the Australian Securities & Investments Commission is expected to release new rules this week that will force banks to lower exit fees.

Prime Minister Julia Gillard explained: "That package is about cracking down on unfair mortgage exit fees, the things that keep people bound into their banks, even though they want to change, because they want to shop around and get a better deal."

While the new rules won't abolish the fees, they will curtail fees ASIC deems excessive.

Exit fees range from $700 and $900 for borrowers with standard mortgages, while smaller lenders charge larger fees or a fixed percentage of the loan.

The big banks collect an estimated $280m a year in exit fees, reports The Australian.

Treasurer Wayne Swan indicated the moves could help borrowers switch their mortgages to another bank and reap the savings.

"I've been concerned for some time that banks have been using exit fees to lock customers in, even while they raise mortgage rates, as sometimes exit fees can be so high that they completely wipe out the savings from switching to a cheaper mortgage with another lender," he said.

ASIC was given greater power in July to act against banks on exit fees.

By BN | 08 Nov 2010