Couple lose home loan complaint in face of $50,000 break fee
A couple who fixed their home loan for five years in 2023 later regretted the decision after discovering high break fees. They took their complaint to the Banking Ombudsman, claiming the bank had acted unfairly. The ombudsman, however, found no wrongdoing in the bank’s handling of the case.
The couple had secured a five-year fixed-rate mortgage but soon wanted to exit the agreement early. When they checked the costs, they found the break fee would be between $45,000 and $50,000. This prompted them to file a complaint with the Banking Ombudsman, arguing the bank had not been transparent.
The ombudsman reviewed all correspondence between the couple and the bank. Their investigation confirmed the bank had properly disclosed the early repayment charges, as required by the Credit Contracts and Consumer Finance Act 2003. No evidence of misleading conduct or pressure from the bank was found, and the complaint was not upheld. Mortgage adviser Jeremy Andrews, from Key Mortgages, highlighted the growing issue of break fees with longer fixed-term loans. He cited another case where a client faced large penalties for breaking a small mortgage with just over three years left. Andrews noted that while longer loan terms are regaining popularity, borrowers must carefully consider the potential costs of early exit.
The Banking Ombudsman’s decision means the couple will remain responsible for the break fee if they exit the loan early. The case serves as a reminder of the financial risks tied to long-term fixed-rate mortgages. Borrowers are being urged to fully understand the terms before committing to extended fixed periods.
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