How much: changing your home loan may cost $1000

By Stuart Fagg, ninemsn Money

Switching your home loan provider may cost up to $1000 in exit fees, according to figures from online financial comparison provider RateCity.com.au.

The recent swathe of interest rate rises announced by commercial banks independently of the Reserve Bank of Australia has left many mortgage holders wondering whether to vote with their feet and switch.

Indeed, Treasurer Wayne Swan, suggested last week that if customers were not satisfied with their rate of interest, they should look to change their home loan provider.

However, as respondents to ninemsn Money’s forum on the topic attested, switching your home loan provider is not as simple, or cheap, as you might think.

Swan, meanwhile, is keen to reform the mortgage market to make it easier for mortgagees to make the switch without facing hefty fees. He has commissioned a report from Treasury on the topic and will talk to the banks about the situation.

According to RateCity's figures, which cover 269 standard variable rate home loans, 90 percent of mortgages have an exit penalty charged as a fixed amount, percentage of the remaining principle, or a number of addition monthly payments.

The earlier you try and exit the loan, the higher the cost, with average fixed amount exit penalties in the first year of $931.43, 1.32 percent of the principle of the loan or 2.03 monthly repayments.

There are also the establishment and other fees attached to a new home loan to consider.

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