Following the latest interest rate rise, Treasurer Wayne Swan urged bank customers to "vote with their feet" if they could get a better deal by switching banks. However, borrowers may be hit with hefty exit fees if they choose to switch loans, particularly if they're locked into a fixed rate.
The highest fee is $8750 on a $500,000 home loan from GE Money paid out in the first 12 months.
Cannex banking analyst Lauren Newlands said closing a fixed rate loan was one of the most expensive options.
"If you close the fixed rate loan early and they (banks) are going to lose money, the lender will recover the full cost of that from the consumer," she said. A new report on the Australian mortgage market shows large non-bank lenders are the worst offenders when it comes to early termination fees. Large non-bank lenders charge an average of $2448 for early termination of a variable rate loan, according to the report by Infochoice.
Homeowners who want the option of switching loans products and banks if they can find a better deal, or who are considering paying out their loan early, should pay particular attention to early termination fees before signing up with a non-bank lender and choose a variable rate loan with lower exit fees.
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