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Prohibiting Early Termination Fees for New Home Loans

Post‑implementation Review – Department of the Treasury

On 3 December 2010, the then Treasurer announced a ban on early termination fees for new home loans. The ban prohibits lenders from inserting a clause into a mortgage contract whereby the borrower is charged an early termination fee if the borrower terminates the loan within a specific time period. The proposal was assessed as likely to have a significant regulatory impact on the economy, and was therefore subject to the preparation of a RIS. However, an exemption from the best practice regulation requirements was granted by the then Prime Minister. This exemption also required the Treasury to prepare a post-implementation review (PIR) within two years of implementation. The proposal was implemented in July 2011. A PIR was completed by the Department of the Treasury in June 2015 and was assessed as compliant by the Office of Best Practice Regulation (OBPR). The PIR concludes that it is likely that the ban has delivered a net benefit to the community through increased transparency and flexibility for consumers. It may have also improved consumers’ ability to exert competitive pressure on lenders. The Treasury finds that retention of the ETF ban is likely to remain appropriate. The estimated annual average regulatory cost of the proposal is $76,000, which has been agreed with the OBPR.