It is predicted that there will be no rivalry in the mortgage market as opposed to what the government expects; that by terminating exit fees on loans there will be increased and fierce competition between lenders. Financial analysts say this will only lead to the death of small lenders. Trends point to an unfair distribution of lending powers in favor of the main banks because without the exit fees on loans, the competitive edge of independent lenders will be limited.
It is imperative for this matter to be attended to sooner rather than later because once it is in place and gathers momentum it will be hard to stop or reverse. Industry experts and several main mortgage entities have made their stance on this issue quite open. They maintain that abolishing exit fees will increase the powers of the big banks and limit the playfield for the smaller lender.
This will effectively make it hard for small lenders to shoulder the cost of putting up mortgages, and this might consequently drive them from the market. If such a measure is put in place then that would be an obvious way of killing healthy and effective competition. It is no secret that at the moment several mortgage brokers operate their businesses without imposing certain fees on their customers.
In the past this trend has met a lot of success because the brokers have been getting their pay from the lenders, but from the look of things this is about to change. It is important to note that when a customer brought by a broker decides to abandon a lender in the first 12 months, the due commission reverts. Essentially this implies that the brokers work but get nothing in the end.
These reverting funds, otherwise known as claw-backs have been there for quite a while, but exit fees preempted borrowers from hopping from lender to lender. If the legislation proposed by the government works then many brokers are going to loose their commissions. This will mainly happen if many borrowers choose to refinance their loans several times since doing so will cost them nothing.
And because many lenders of loans can give "cash back" incentives it is the borrowers who will in the end earn more. This may ultimately compel mortgage brokers to introduce mandatory fees for their loans related services. An increase in the fees mortgage brokers charge will therefore translate to increased cost of loans.
It is imperative for this matter to be attended to sooner rather than later because once it is in place and gathers momentum it will be hard to stop or reverse. Industry experts and several main mortgage entities have made their stance on this issue quite open. They maintain that abolishing exit fees will increase the powers of the big banks and limit the playfield for the smaller lender.
This will effectively make it hard for small lenders to shoulder the cost of putting up mortgages, and this might consequently drive them from the market. If such a measure is put in place then that would be an obvious way of killing healthy and effective competition. It is no secret that at the moment several mortgage brokers operate their businesses without imposing certain fees on their customers.
In the past this trend has met a lot of success because the brokers have been getting their pay from the lenders, but from the look of things this is about to change. It is important to note that when a customer brought by a broker decides to abandon a lender in the first 12 months, the due commission reverts. Essentially this implies that the brokers work but get nothing in the end.
These reverting funds, otherwise known as claw-backs have been there for quite a while, but exit fees preempted borrowers from hopping from lender to lender. If the legislation proposed by the government works then many brokers are going to loose their commissions. This will mainly happen if many borrowers choose to refinance their loans several times since doing so will cost them nothing.
And because many lenders of loans can give "cash back" incentives it is the borrowers who will in the end earn more. This may ultimately compel mortgage brokers to introduce mandatory fees for their loans related services. An increase in the fees mortgage brokers charge will therefore translate to increased cost of loans.
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