Switching Mortgage Lender Costs $1750

Post by Sharat on December 11, 2009 · Under Business News, Company News, banking, home loans, interest rates, mortgages · Comment

Mortgage borrowers seeking to switch their lender to National Australia Bank from Westpac to take advantage of NAB’s lower interest rates, would be hit with a $1750 fee that could take as long as three years to recoup from savings generated by switching to a mortgage with a lower payments.

According to a study commissioned by the Australian, larger borrowers with at least a $1 million mortgage would benefit far more from shifting lenders that the average mortgage holder.

NAB is aggressively marketing its home loan offering, hoping to build its mortgage lending portfolio and gain market share from Westpac, who raised its interest rates by nearly double the Reserve Bank of Australia rate increase.

Westpac currently charges the highest interest rates amongst the Big Four lenders, whilst NAB has the lowest. NAB, who raised its interest rate in line with the central bank is looking to capitalize on this fact and attract jilted Westpac customers.

According to the research a mortgage holder with a $300,000 home loan who flipped to NAB would save $50.88 a month on their monthly repayments. However the savings are largely mitigated by the fact that both lenders charge large exit fees on their mortgages.

For a borrower wishing to change lenders on a loan less than four years old, the borrower would be hit with a $900 exit fee by the current lender, a further $250 discharge fee, and then a $600 application fee for an NAB mortgage.

An average mortgage borrower with a $300,000 home loan would take 34.5 months to recoup the $1750 in fees payable based on a$50.88 per month savings rate.

Larger borrowers with a $1 million mortgage would save $169.91 a month and it would take just 10 months to recoup the fees.

“A lot of borrowers when they refinance can be sidetracked by focusing solely on the interest rate and be blinded to the fees which go with this type of transaction. Borrowers shouldn’t be afraid to push to have their fees waived or reduced.” an analyst was quoted a saying by the Australian.

John Salamito NAB consumer products general manager says the lender has reduced transaction and savings accounts fees already, and that home loan fees were currently being examined.

“We believe fees are something the industry should be looking at to ensure they are not an impediment to effective competition,” he said.

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