Banks hang tough over home loan 'break' fees

Bank chiefs are resisting pressure to be lenient with customers wanting to break fixed-term mortgage agreements. Rapid falls in floating interest rates and new fixed rates have meant many are left locked into higher payments

Finance Minister Bill English said yesterday he expected banks would be pressed to reduce the penalties for breaking mortgage agreements to get cheaper interest.

And state-owned Kiwibank could expect a discussion with him as shareholding minister on the subject, he said.

The cost of breaking a mortgage was highly variable. "I think that is going to influence people's choice of banks."

The slashing by the Reserve Bank of the official cash rate from 5 per cent to 3.5 per cent will flow on to new borrowers who opt for floating rates and to borrowers whose terms are expiring.

But many borrowers are feeling stranded on high fixed rates as the gulf between them and the lower rates widens.

Labour leader Phil Goff yesterday called on the banks to waive break penalties - not universally, but for borrowers in genuine hardship where perhaps one partner is made redundant.

To read the full NZ Herald article click here

Posted: 30 Jan 2009

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