The Australian Securities and Investment Commission (ASIC) has released a set of guidance clauses for mortgage lenders, but they are still powerless to stop banks raising interest rates above those set by the Reserve Bank.
Yesterday (10 November) ASIC released guidance for mortgage lenders that sets out how provisions in the National Credit Code and unfair contract terms law apply to mortgage early termination fees.
The code details the limited circumstances in which a lender may vary exit fees during the life of a mortgage, and the type of loss that should not be recovered through exit fees.
"The law limits these fees to the recovery of a lender's loss caused by the early termination," new ASIC chairman and ex-Mallesons managing partner Tony D'Aloisio said. "Lenders cannot use exit fees to discourage a borrower from switching their loan or to punish them for doing so."
Professor Ian Ramsay, the director of the Centre for Corporate Law and Securities Regulation at Melbourne University, told Lawyers Weekly that while ASIC's announcement include some welcome measures, such as the need for mortgage lenders to provide documentation on how they keep and calculate exit fees, there are still some "unknowns".
"What is unknown is whether some mortgage providers which have simply viewed exit fees as a profit centre, which is illegal, will seek to increase fees elsewhere," Ramsay said. "It will be interesting to see if and when ASIC takes enforcement action."
ASIC's announcement came on the same day the ANZ bank announced it would increase its standard variable rates by 39 basis points to 7.80 per cent, well above the RBA rise of 25 basis points.
ANZ also announced it would abolish its $700 mortgage exit fee.