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MFAA backs DEFs

Staff Reporter 3 minute read

By: Belinda Luc

The MFAA has submitted a government proposal stating that deferred establishment fees (DEFs) foster competition in the mortgage market and help drive better interest rates for borrowers.

According to the MFAA’s formal response to ASIC Consultation Paper 135 ‘Mortgage early exit fees: unconscionable fees and unfair contract terms’, DEFs are a mechanism that allow the non-bank sector to offer increasingly competitive interest rates to borrowers.

“Non-bank lenders provide consumers a strong alternative in the lending market, in many cases offering very competitive interest rates,” MFAA chief executive officer Mr Phil Naylor said yesterday.

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Mr Naylor argued that DEFs were not a penalty or even a fee but only applicable when a lender gives the borrower the option of deferring the establishment costs of the loan in return for a lower interest rate.

“The reality is if non-bank lenders were required to diminish deferred establishment fees, the end result would be higher up-front fees and higher interest rates,” Mr Naylor said.

“In turn, this would reduce any downward pressure on interest rates, and reduce the likelihood of innovative and competitive products in the mortgage lending market.”

MFAA backs DEFs
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