15 January 2008
IT CAN cost thousands of dollars for those unhappy with their mortgage to change lenders - and the fees can be worst for those the traditional banks reject.
Commonwealth Bank, which enjoys the largest share of the mortgage market, charges $700 to close a variable rate loan within four years of its establishment. ANZ charges the same fee, while National Australia Bank and Westpac charge $900 and St George charges $1000.But those fees can pale compared to the charges levied by some "non-conforming" lenders, who traditionally loan to those who can't find credit with banks.Many, though not all, of these lenders charge a percentage of the total loan amount to break the loan. The percentage is typically about 1%, though it ranges as high as 2% with some lenders."What looks cheap up front can be expensive on the back end," said Dennis Orrock, general manager of online financial services portal InfoChoice.Since July 2003, lenders have been required to help their customers understand the full cost of a loan by publishing both the base rate and a "comparison rate" that accounts for some fees.But comparison rates don't capture fees that may or may not be charged, such as fees for paying the loan early.Mr Orrock said lenders keep their comparison rates low by taking fees off the front of the loan and heaping them on the end as "exit fees" that are charged if the loan is paid early."When people are taking out a loan, the last thing they are thinking about is closing it," he said. Once the domain of non-conforming lenders, such charges are now levied by the major banks.But Australian Bankers' Association chief executive David Bell stressed that banks were required by law to disclose all the fees charged on their products.