Home Loan Exit Fees: The Cost of Ending a Home Loan Early

22 Pages Posted: 14 Dec 2010 Last revised: 7 Apr 2011

See all articles by Neil Ashton

Neil Ashton

University of Melbourne - Centre for Corporate Law and Securities Regulation

Ian Ramsay

Melbourne Law School - University of Melbourne

Date Written: December 12, 2010

Abstract

The fees charged by financial institutions are coming under increasing scrutiny. In this paper exit fees, or the fees charged by financial institutions for early termination of a variable rate mortgage, are analysed. The authors discuss why these fees are a concern, including the potential impact on competition in the home loan market, the high rate of refinancing, and the way in which exit fees can exploit human cognitive biases. The authors also review the regulation of exit fees and present data on exit fees drawn from a study of 198 home loans offered by a wide range of financial institutions and also data obtained from two consumer law centres. The authors conclude with observations relating to the new role of the Australian Securities and Investments Commission in the regulation of exit fees.

Suggested Citation

Ashton, Neil and Ramsay, Ian, Home Loan Exit Fees: The Cost of Ending a Home Loan Early (December 12, 2010). U of Melbourne Legal Studies Research Paper No. 535, Available at SSRN: https://ssrn.com/abstract=1724462 or http://dx.doi.org/10.2139/ssrn.1724462

Neil Ashton

University of Melbourne - Centre for Corporate Law and Securities Regulation ( email )

Victoria 3010
Australia

Ian Ramsay (Contact Author)

Melbourne Law School - University of Melbourne ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia
+61 3 8344 5332 (Phone)

HOME PAGE: http://law.unimelb.edu.au/about/staff/ian-ramsay

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