news.com.au: Loan pain as mortgage entry fees explode

Mortgage exit fees are causing huge increases in loans / File
Lenders lift "front-end" fees Reaction to ban on exit fees Costs spread across new borrowers
NEW home loan customers are being hit by massive increases in upfront mortgage fees because of the Federal Government's ban on exit fees.

Three lenders have already lifted their "front-end" fees by up to several hundred dollars with a "flood" of higher charges expected from other lenders when the ban kicks in tomorrow.
Interest rate watchdog Mozo.com.au yesterday revealed Aussie, ME Bank and Greater Building Society had all ramped up their application and start-up fees ahead of the Government's ban.
Treasurer Wayne Swan was warned by the finance industry that the ban would worsen competition in the mortgage market by forcing lenders other than the four major banks to increase their application fees.
"This seems to confirm fears that smaller lenders will be most hurt by the exit fee ban and will need to re-price their loans accordingly," Mozo managing director Rohan Gamble said yesterday.
According to Mr Gamble, front-end fees have been increased by up to $500 in one case and others are expected to follow suit after July 1.
Mitchell Watson, an analyst at financial research company Infochoice, said he had already received one notification from a lender about an increase in application fees and he expected a "flood" of higher charges tomorrow.
"This was always going to be the position and what the industry warned about," Mr Mitchell said.
According to one of Australia's largest mortgage brokers, Resi, Treasurer Wayne Swan's new policy will hurt new borrowers, whereas exit fees only applied to those people who paid off their mortgage early or who wanted to switch lenders.
"On behalf of all consumers, I feel sick about it. They're paying additional fees because the Government's banned exit fees," Resi chief executive Lisa Montgomery said.
"Those extra costs now will be spread across all new borrowers. Everyone will pay now, not just those lucky enough to pay off their mortgage early," Ms Montgomery said.
A spokesman for Treasurer Wayne Swan said: "Lenders use exit fees to shackle Australian families to their mortgages, not to raise revenue. The fees are there to stop consumers switching. We've given the Australian Securities and Investments Commission the power to crack down on any unfair mortgage fee used to gouge customers, whether it's an entry fee or any other type of fee," he said.
"The Government's banking reforms are all about giving Australian families the freedom to walk down the road and get a better deal."
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