Almost 12 months after the government scrapped exit fees, Australia’s non-banks are still trying to recover and actively compete with the majors.
Speaking to the Australian Financial Review yesterday, Aussie Home Loans’ executive chairman John Symond said the exit fee ban stifled competition rather than promoted it.
“At the moment there is no competition,” Mr Symond told the AFR.
“Wayne Swan, regardless of what he has said, hasn’t helped competition with the small lenders. In fact he has made it tougher.”
Homeloans’ general manager Greg Mitchell agreed with Mr Symond and told The Adviser that the exit fee ban was a “free kick” to the majors.
“I agree with what John [Symond] has said. By removing the fees it places further impact on the non-bank sector trying to remain competitive with the major banks,” he said.
“We have definitely seen a shift of borrowers from non-banks to the majors.
“There are a lot of things around exit fees that the non-banks charged at the time. When you look at the fees, which were around $700, and compare it to the non-banks, what we found was we used to get adverse feedback for charging more, but it was a necessary evil for us to remain competitive.
Mr Mitchell said the government’s decision to ban exit fees has ‘backfired’ because non-bank lenders generally offer low-upfront fees to stand out from the majors.
This discount is then offset by heavy exit fees if a borrower refinances a loan early.