Churn to follow exit fee abolition - Broker News (21 March 2011)
Monday, 21 March 2011
Vow Financial CEO Tim Brown has said the proposed ban on exit fees will only serve to increase churn.
In an email to Vow Financial's broker network, Brown said the government plan to abolish exit fees was missing the point, and was not likely to increase competition.
"The debate around the removal of exit fees does nothing for competition, it just increases churn," he said.
The heart of the problem with competition is the cost of funding mortgage, according to Brown. He said the government needs to do more by supporting securitisation as the Canadian Government has done successfully throughout the GFC.
"AOFM setting aside $16b is not even one month's lending volumes in Australia," Brown said.
"If the Government is serious about making the market competitive, forget about exit fees and focus on increasing funding sources," he urged.
The MFAA has previously advocated an approach modelled on the Canadian mortgage market, and lamented the recent government proposal to make an extra $4bn available to support securitisation.