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The government’s plans to ban mortgage exit fees have been criticised by the mortgage industry.
Phil Naylor, CEO of the Mortgage and Finance Association of Australia (MFAA), said the ban was a knee-jerk reaction which would do more harm than good.
"What the government is doing now is lunacy - catching a quick 10 second grab (banning exit fees sounds good at first glance) - at the expense of the Australian public."
"Nobody has advanced one good reason for banning exit fees, and so this initiative is playing on cheap headlines without understanding how the mortgage industry works. “
Mortgage exit fees were introduced in the 1990s, as a means of offering borrowers reduced interest rates. According to the MFAA, if exit fees are banned, borrowing will become harder, particularly for first home buyers and those with small deposits because costs previously carried by lenders will need to be charged upfront.
Paul Ryan, CEO of Intouch Home Loans, said exit fees weren’t the biggest barrier to borrowers refinancing.
"The government seems to be fixated on exit fees as being the major deterrent to why consumers are unable to refinance to a lower rate," he said.
"This isn't the case. The real elephant in the room is the double payment of mortgage insurance a customer is subjected to any time they look to borrow above the 80 per cent of the property value."