One of the major barriers to refinancing to a better loan is the fact that there are now moves to abolish the punishing exit fees which prevent people from switching to a better deal on a home loan.  In the new package announced by the government desinged to control the big four bank monopoly,  Treasurer Wayne Swan at the weekend that borrowers who take out a home loan from July next year will be spared an early exit fee.

The new legislation, to be introduced in 2011, would see lenders prosecuted if they tried attempt to re-introduce exit fees under another title.  As it stands, the Commonwealth and Westpac banks charge a $700 and $900 exit fee respectively.   ANZ has also offered some sweeteners.  It says it will abolish its deferred establishment fee, more commonly termed an exit fee, as well as dropping fees for customers switching to a special three-year fixed loan it is offering.  ANZ is cutting its three-year fixed home loan rate by 44 basis points to 7.1 per cent per annum until the end of the year.

ANZ says there will not be any more increases in the bank’s interest rates for now.  “Obviously we will continue to keep a close watch on funding costs. Certainly I hope there isn’t any further move because I do appreciate that this is very stressful on many of our customers,” he said.

This reform will make it much simplier and cheaper to exit a home loan and change to a provider who can offer a better deal, increasing the overall competitiveness of the banking sector as they are forced to match each other’s prices when customer’s fly to to the cheaper loans or the loans that provide a better service.  If you are interested in refinancing, a solicitor can assist you with the transfer of the loan by discharging the mortgage and creating the new mortgage with the bank.