Majors slam proposed govt reforms

Westpac’s chief executive Gail Kelly has slammed the government’s proposed ban on exit fees as “poor public policy”.

In an interview with The Australian, Ms Kelly said the abolition of exit fees would only make it harder for smaller lenders to compete.

Ms Kelly said that while the fee was not “a big matter for us at Westpac”, smaller players would struggle to remain competitive. A statement that I agree with  and it seems the vast majority of those in the industry agree with Ms Kelly’s sentiments.  Exit fees were essential to the competitiveness of smaller lenders and non-bank players.

If the government truly wanted to introduce competition back into the mortgage space, they would make Lender’s Mortgage Insurance portable. I also believe the government needs to abolish stamp duty and the property market would recover quickly.

The big area where an opportunity was lost was in Lender’s Mortgage Insurance. Currently, those borrowers that take out Lender’s Mortgage Insurance often have to pay the fee again when they refinance with another lender. This is a huge deterrent to borrowers switching lenders, but it is a deterrent that doesn’t necessarily have to be in place after all it is an insurance policy to protect the lender so why shouldn’t it be transferrable?