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.
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