Goff wants action on mortgage break fees
Labour leader Phil Goff is calling on the Government to clamp down on banks charging exorbitant fees to people wanting to break their mortgages due to hardship.
Interest rates have been tumbling over the past few months and are expected to go even lower before the end of the year; last year the floating rate tipped 10 percent but is currently hovering around 7.
People who refixed mortgages last year can only watch and wait for their terms to end, or pay hefty fees to refinance.
"The banks have locked people in. If you've got a three-year mortgage and you're still paying 9 percent interest rates and everybody else is paying considerably less, they'll put a hefty fee on for you to renegotiate that mortgage," Mr Goff said.
"I think in particular circumstances, where there is hardship, the banks have got to come to the party and the Government has got to make that clear to the banks."
He believed those most likely to be affected were people who had bought in the past few years at the peak of the housing boom and whose mortgages were higher than their properties were now worth.
"If one partner in a relationship loses his or her job and they can't meet the mortgage payment, perhaps they're locked into a three-year mortgage term, then that family stands to lose not only the income from the person that's out of work but also their home," Mr Goff said.
"I see no sign, at all, that the Government has thought about how they might address that problem. They're doing it in Australia. We need to look at that problem here. Potentially it's a serious one."
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Comments and questions16
He's talking about when people are suffering hardship. Don't forget we're guaranteeing the banks' deposits now to help them out in their time of hardship so it's only fair they are reasonable when their customers are suffering hardship.
we all make a choice at the time to fix or float, if your not sure you fix short term when rate's are likely to fall.Some people are silly enough to beleive the bank's sale's talk,well they will live and learn. I was recently told by the National Bank in nov.08 that by june 09 rate's would be back to 10%,well I'm still floating and watching them freefall.If Govt.bail us out time after time we will need them in the toilet to wipe our bum's soon!
People who fixed their loans chose to and now they have to live with the consequences of their poor choices. And to force the banks to not charge such fees would mess up their plans and take money from them that they rightfully earned.
Could you imagine if Goff was the prime minister. Business confidence would not even exist. People would be scared that Goff would say that your honest business is hurting people and force you to give all your profit back.
The protection of banks is indirect. By assisting the banks we're actually protecting ourselves because of the critical function that banks play in the system. If assistance is required then a better approach might be for the government to assist borrowers directly.
This sort of talk and the resulting moral hazard is partly to blame for the situation that we are in. Pretty lucky we have a new Government.....
Goff had nine years as a senior member of the last apology for a government; how come he did nothing about these 'break fees' then; and why is it now so important to him.
Labour 'grasping at political straws' to stay afloat me thinks!
The CCCFA governs the fees and was introduced by the Labour government. I bet no Bank is charging more than the act stipulates they can.
To "Read what he actually said", what is the definition of suffering hardship? I think every NZer could fall into that category at some stage.
Goff seems to have forgotten basic banking. If you fix your loan with a mortgage the bank is borrowing in the financial markets at a set swap rate at that time. By breaking this rate early at a later date, the bank is liable to pay the difference. He must know this, surely. Does he really want to drive our banks into the ground? What are his suggestions to deal with this, or is it merely grand-standing?
Why should the Government intervene (presumably with my money) into what was an arms-length commercial transaction between two parties? Sure, if there was any impropriety or if the information presented was not factually correct then there should be grounds for redress. However if a borrower has over-extended themselves, or locked in a high rate and now has to suck it up then frankly it is not the Governments (or the banks) problem.
Fixed mortgages are not a one-way ratchet mechanism. The bank has gone out and locked-in their exposure with a back-to-back agreement which would also require break-fees paid. To suggest that banks should be bear the cost in such an instance is daft and nothing more than political grandstanding.
Banks would only force the cost of such a hair-brained idea onto the rest of their customer base, meaning those who did make the concious decision to lock their rate in are being subsidised by the rest of us. Do your own research and make sure you are educated enough to make your own calls on big decisions like this, rather than listen to a sale-pitch from a bank.
I totally agree with Simon on his points here and think he would make a great Prime Minisiter.
The real problem is not the charging of fees, but the calculation. The "good" banks use the rate they can relend the money at, but the "bad" banks use a wholesale rate, which produces a rsult far inexcess of their losses. shame politicians don't come with a brain and common sense
Join the group "KIWIBANK - Unfair Early Mortgage Repayment Fees" on www.Facebook.com to unite our voices on unfair Early Repayment Charges. It should be based on the difference in lost interest of the old compared to the new fixed rate, as opposed to the wholesale rate.
It's our bank - it's time to take it back and have our say. Join me on Facebook and tell Kiwibank "It's ours!" Reduce your early mortgage repayment fees inline with other banks, such as ASB Bank and help us Kiwi's out who have lost our jobs and may loose our houses too!
KIWIBANK - Unfair Early Mortgage Repayment Fees"
Email: Kiwibank.highERC@gmail.com
All emails will be compiled and sent to the Commerce Commission.
Early advocate of Kiwibank - now I'm not so sure!
Desperate times need desperate measures. No need of bail out packages then - let us all get buried in this recession. The Banks are legally required to be "reasonable" in callculating break fees (Credit Contract and Consume Finance Act). The Commerce Commission should review how the banks' calculation of break fees and assess the fairness. Banks liks Westpac are trying to recover the maximum posible loss not a reasonable loss. And also the Act requires clear disclosure of the break fees in the loan documents. My suggesstion is do some reasearch and get the Commerce Commission to look at the 1) Reasonablness 2) Disclosure ifn loan agreements. These times require all of us to stick to gether. those who think they can survive on their own - you will not only need the govt to wipe your bum but you will be doing it in a public toitlet!!
If you are a Westpac customer and think breakfees are unreasonable pls email to breakfeeswestpac@gmail.com
Who would have thought that the rate would reduce so drastically in so short a time? If you were more experienced etc, yes, then you would probably have guessed that the Govt would reduce the OCR to boost the economy & then logically the mortgage rates would follow. But, hey, we are not experts (unlike some of the persons on this discussion forum). We regular Joes rely on the bank sales talk & other advice from whomever will give it (no one wants to put their head on the block - not even your financial adviser). So we do what research & homework we can only to be faced with huge break fees or continue to pay high mortgage rates while the rates tumble. I think its unfair & unethical. We fixed half our mortgage a few months ago for 2 years at 8.5% & now face nearly $30 000 break free fees.We also were advised to fix or face higher interest rates by our friendly bank advisor. I think in the light of the abnormality of the interest rate hikes & now the sudden freefalling that there should be some change in the rules. With the new rates I am sure the economy will be boosted to a certain degree with more property sales & purchases happening so there will be more business for banks & thus more money for them to make off us suckers.
Our family was hit by redundancy in Oct 08 and still unemployed after applying for about 40 jobs. It's that time again to refinance our mortgage. We brought on 100 percent finance because at the time that's all we could afford and now trying to refinance with the bank after paying high mortgage for two years they say no because we dont have 20 percent equity. We have to stay with Nationwide on 8.85 percent on one income what a bummer. If we were able to cross to a bank it would save us over $400.00 fortnight. Does anyone have any ideas.
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