6 July 2011
The Gillard government’s push to “give all Australians a fairer go in the banking system” has resulted in legislation being passed to come into effect from 1st January 2012.
Even though the National Consumer Credit Protection Amendment largely targets the credit card process, it also contains an item of importance to home loan borrowers. The Bill delivers on the government’s well-publicised commitment to introduce compulsory, one-page key fact sheets for new home loan customers.
The fact sheets will allow consumers to easily compare loans “offered by the big banks, regional lenders, credit unions and building societies.” Curiously, there is no mention of non-bank lenders so it remains to be seen how that plays out.
The health insurance industry already has in place a similar fact sheet template which seems to work for it so this new move by the government is to be applauded if it helps borrowers truly compare like with like and consequently get the best deal for them.
The National Consumer Credit Protection Amendment comes hot on the heels of the banning of early exit fees which is now in place for new loans. This could well be a double-edged sword for home loan borrowers. In the past, application fees were usually deferred by the lender and only charged if the borrower paid out the mortgage, for whatever reason, in the early years. However, as exit fees can no longer be charged, industry opinion is that they may revert to being charged upfront again – making the loan even more difficult to get into.
The other alternative for lenders is to hike up interest rates. Both solutions are equally unpalatable to borrowers so it remains to be seen exactly how lenders will juggle this issue.
The bottom line is, as always, borrower be aware!