MFAA touts 10-day discharges as productivity fix

She added that when borrowers could “effectively access, compare and switch between lenders, capital is reallocated, more effectively supporting investment, labour mobility and broader economic performance”, but that “where the system is constrained, productivity is diminished”.

Pannek said current discharge and refinancing processes were doing exactly that and outlined that administrative red tape and opaque practices were acting as practical obstacles to seamless switching.

“Friction in refinancing and delays in discharge processes all act as barriers to switching,” she said and warned that this “reduces competitive pressure, limits mobility and increases costs for borrowers”.

Industry bodies have long been calling for comprehensive reforms to the discharge process, with the Australian Competition and Consumer Commission’s Home Loan Price Inquiry report in December 2020 recommending that the government force all lenders to be subject to a maximum time limit of 10 business days to complete the procedure.

However, the then Morrison government did not respond to the report, and despite Treasurer Jim Chalmers tasking his department to examine the ACCC’s proposals in December 2023, no response has since been made by the Albanese government.

3 reforms to fix the discharge process

When asked how the discharge process could be improved, Pannek laid out three changes the MFAA wanted legislators to back.

“The first is a mandated 10‑day discharge time period,” she said.

“So, if a borrower was to seek to discharge from their existing lender, the lender would need to process that discharge within a 10 day time period to provide certainty.”

She framed this as a simple way to reduce uncertainty around settlement time frames and to stop drawn‑out processes from undermining refinancing decisions.

Her second recommendation focused on a pattern where borrowers were increasingly being drip‑fed offers that did not reflect the lender’s genuine best rate, further stretching out the discharge.

In many cases, she said: “It will be one offer on repricing, the borrower will decide it is best for them to discharge, and then that lender will come back with a subsequent offer on pricing, which is very confusing, and in essence, delays the discharge time period.”

The third plank was to allow brokers, with clear consent, to manage discharges on behalf of their clients.

“In some instances, a lender will require that the customer themselves call in and ask for the discharge to be processed,” she said.

“This lengthens the period of time and creates uncertainty and additional cost for the borrower.”

Pressed to identify the single biggest barrier in housing finance, Pannek again pointed to these switching inhibitions.

She said there was “a lack of clarity around timing for the discharge process, retention practices by lenders”, and that the industry was seeking “consistency in that process right across the board”.

Serviceability buffers, mortgage prisoners, and CDR

The committee also probed whether the serviceability buffer remained a meaningful hurdle, particularly for would‑be refinancers and first home buyers.

Pannek said the MFAA had previously urged a rethink of the 3 percentage point buffer, stating that a more flexible setting could better reflect changing rate cycles.

In response to suggestions the buffer could operate more like a band than a fixed add‑on, she said the MFAA supported “a more dynamic buffer in upward or downward cycles”, and that “a review of the flexibility of the overall serviceability buffer could be warranted with any broader review of the work that APRA do”.

On the issue of ‘mortgage prison’ – borrowers meeting repayments with their existing lender yet unable to qualify for a cheaper refinance – Pannek pointed to existing exception pathways that allowed lenders to apply a lower buffer where a borrower would clearly be better off.

She said members were seeing these exceptions used effectively in some cases, with borrowers “meeting all of the requirements, all their payments with their existing lender”.

“There are circumstances in which that can work very effectively,” Pannek said.

Pannek also highlighted data‑sharing reforms as a key productivity lever in the origination process.

“We have advocated and continue to do so for CDR in the home lending process, and we’re seeing a lot of success in that with the home loan application use case by brokers,” she said.

“Staying the course on open banking and prioritisation of the home lending use case would be key.”

Regulatory duplication, levies, and stamp duty also in the frame

The MFAA’s written submission set out a broader productivity agenda touching on regulatory design, funding, and state tax.

It called for an independent, time‑limited review of post‑royal commission reporting frameworks, including reportable situations and internal dispute resolution reporting to improve co-ordination.

Pannek told the committee that most brokerages were often “reporting the same information over and over again” and argued for a “report once” model.

The submission also urged regulators to ensure levy frameworks better reflected demonstrated risk and avoid cross‑subsidisation that, in the MFAA’s view, weakened competitive neutrality.

Finally, the association backed a phased transition away from upfront stamp duty towards recurrent property‑based taxes.

[Related: Calls mount to use ATO data in open banking to reduce fraud risk]