Australia Goes Overboard With Mortgage Regulations
While Canada’s Finance department works to standardize and clarify much-hated mortgage pre-payment penalties, Australia is trying to outlaw them altogether.
Australia’s mortgage market parallels Canada’s in the sense that big banks dominate the industry.
Many argue Australia’s move is pointless, however. Consumers are cheering the potential departure of penalties (Aussies call them "exit fees"), but it’s a virtual given that banks will recoup their costs in other ways, including origination fees, higher interest rates, etc. Few in the know seem to believe that homeowners will come out ahead.
Australia also wants to prosecute banks and fine them $10 million AUD or more if they signal their rate changes in advance. This move also seems half-baked, say bank analysts, because banks will still follow each other’s pricing. Worse yet, consumers and investors will no longer receive guidance from banks on the path of future rates.
There’s no doubt that tremendous politics are behind these pieces of legislation. That's unfortunate because Australia’s bills, as drafted, will hurt consumers as much as they’re intended to help them.