Unfair bank exit fees? Do owners allow tenants to break leases without incurring extra charges? No. Renters are liable for anything from a month’s rent to the rest of the lease period. A renter is slugged many times more than the owner is for shifting a 30-year mortgage. What of the other “unfair moving fees” (removalists, cleaning, mail redirection and reconnection fees) an owner can impose on a renter: can we get those paid for by the owners?

While politicians aim their “unfair exit fees” pitchforks: I have a two-year mobile phone plan which has fees if I decide to swap to someone with a better plan. Where are my enraged politicians to take down greedy telecommunications companies?

A two-year gym membership would result in higher exit fees than 30-year mortgage owners would cop. I have a possible solution: mortgage owners could use a small part of the first home owner’s grant, duties exemption or massive tax writeoffs (for negative gearing) to cover these fees.

Nathan Lee Surry Hills

It was followed up the next day by a piece from Ross Gittins on “Demand a better deal and stop moaning about banks“.

Forgive me if I’m less than impressed by the tirade of righteous indignation being unleashed against the banks. It’s self-serving, selective and uninformed.

I guess when you get angry you forget to check things out and think them through. The media and the politicians on both sides are whipping up indignation, rather than conveying information and fostering understanding.

Hear hear!

You'd think you'd read the details on a mortgage contract huh?

So you don’t think I’m just making stuff up
As a concrete example, here’s what Optus had to say about my request to close off my account (because I get shitty reception in the building at work and my phone is pretty useless if I am going to get dropped calls while hugging the window hoping they’ll stay connected.

Hi Nathan,

Thank you for your email.

Your 24 month contract end date is 30 June 2011. Upgrading or Cancelling your service before the end date will incur the following fees-

o $504.00 (including GST) Early Upgrade fee or Contract Cancellation fee
o $112.00 (including GST) Handset Payout fee (8 remaining payments of $14.00 including GST)

I would recommend that you wait until you have only 3 months remaining on your contract to upgrade as we maybe able to offer an upgrade without the Early Upgrade fee.

… snip for brevity..

All the best

Melissa
Web Servicing Team
Optus

So there’s $504 to end my contract nearly a year and a half in and a handset payout fee.. So to get out of just 7 and a half months of a 2 year contract it’ll cost me $616.
Let’s look at what the bank exit fee whingers are complaining about from this article I can gather the following are the exit fees for the big banks:

• ANZ = $700
• CBA = $700
• NAB = $900

So it costs less to move hundreds of thousands of dollars of mortgage to another bank than it does for me to shift off Optus for ANZ and CBA. So a year into a 30 year contract worth $500k is less expensive to swap than my bloody phone plan.

Fatcat Banker cat says noes.

As I said, maybe they can use some of those tax breaks (for negative gearing) or blatant vote buying handouts (1st homeowner’s grants). If you think the whining is bad now, just wait til these mortgage owners start learning about negative equity. That and politicians seem to forget mortgage owners are in the minority, though I guess most of them are taking advantage of the generous tax scams available to investment property via negative gearing.

Along with the Libs and ALP Bob Brown’s jumped on the bank exit fee bandwagon and reckons:

“It’s time they gave something back to the average Australian.”

No, Bob, they never EVER gave anything to the average Australian. Well, you know, except the fucking mortgage in the first place. *slap*

For the unfamiliar: “negative equity” is a situation where people owe more on their mortgages than their property is worth. Those in the USA, UK and Japan are quite familiar with the term with over one-fifth of US mortgages in negative equity since their real estate market went kaput.

Pro property gambling media

The Sydney Morning Herald (and other Australian media) is very pro-property. Unsurprising really as they rake in a lot of cash from glossy real estate advertising. An article “Bubble-burst fears rise” is somewhat strange in amongst the business-as-usual real estate spruiking. There have, in the past, been articles proclaiming half of sydney siders would be millionaires thanks to property doubling though as one blogger points out the absurdity:

Maybe the illusive dream of six zeros is within reach for all people around the world. All you have to do is borrow a million dollars. The fact that you owe the money to the bank isn’t relevant. According to news.com, you are still a millionaire!

I know the trick to becoming rich that none of these people do: real estate!

Another guy lost a bet to walk to the snowy mountains because the Government whipped out the best of all artificial price inflationary devices: the new home-owner’s grant. Basically this was a tax payer funded leap of people who hadn’t been able to save for a house or pass the necessary financial criteria into the real estate speculation game. Was it designed to increase the supply of new houses, new developments etc? Nope, not really. It was a chunk of money that went straight to banks, real estate agents and lawyers for the exchange of existing property (it did give more to new property, but let’s face it: in urban areas there’s not many spare blocks awaiting a new house). Additionally we had reductions in state revenue via stamp duty concessions and a bunch of people scamming the system for an investment property (“Oh, of course I live there..”). That decision to inflate the cost of existing houses was money that we as society were taking away from hospitals, schools, police, fire, universities etc in order to fuel a real estate boom.

Some unofficial free (non-financial adviser) financial advice*

Call me crazy, but I still cling to the idea that you shouldn’t buy shit you can’t afford. If you can’t afford it then.. wait for it.. Don’t fucking buy it! If you need to get a loan make sure you look at the historical rates and factor in some slack and money to still eat.

If you can’t afford it then at least do the political process a fair deal and not whinge when your foray into the world of debt fuelled real estate gambling doesn’t pay off.

If you are only able to get into real estate at the lowest interest rates in 20 something years and rates typically sit at double that (and have gone as high as 18-19%) then perhaps you should just save for a while longer or go with another plan. Asking a bank or someone making a commission from a bank as to whether you can afford a particular loan and them saying “yes, of course” is like asking the wolf whether he can mind the chicken coop.

* should not be taken as actual financial advice. I may work for a bank, but I have no formal credentials in this space whatsoever.. Purely interested in the topic from a rant point of view.

The spin can spin
It’s ok, the Sydney Morning Herald and other newspapers can go from inflating the bubble via puff piece real estate hype to handy guides on “dealing with negative equity” and “cooking gruel for the mortgage stressed”.
Perhaps “The reality of debt obsessed society” or “see, real estate prices DO go down”?
Either way I’d lay money we will we keep getting terms like “hardship” and “endure” used to describe people’s voluntary debt-to-the-eyeballs situation. I even had a religious workmate compare mortgages to slavery from biblical time. Such is the horrendous injustice foisted upon the public by evil banks dangling mortgages in front of people with future millionaire property mogul aspirations.

But Australia’s situation is special
Oh we’re special alright, just “needs to be told not to hit self in head with a brick daily” special. We’ve got the world’s most overpriced property, but that doesn’t mean a thing apparently.

Fight club quote on the matter.

We’ll continue to hear that unlike every other real estate bubble (US, UK, Japan etc) Australia is DIFFERENT, we’re UNIQUE. We’ll hear how it’s not crazy that people are paying a million bucks for a junkie infested rats’ nest, or an $800K “bargain” for living next to a toxic waste dump. Don’t worry about the toxic waste dump because soon you’ll just get another mortgage on a slightly better place once you’ve built up enough equity in your current place. *slaps head* Of course! Two mortgages on this notion of price increase gambling must be twice as safe as having just one.

Oh, of course we’ve got immigration.

The redneck approach to immigration control. Also funnily enough what the real estate industry is saying effectively with their "shortage of 200-300,000 houses" garbage.

That whole “big Australia” concept and some very dubious sounding “Shortage of 200,000 houses” (now 300K I saw somewhere, or just rounding up?) that keeps getting thrown into articles. Where did that number come from? If this was the homeless figure: perhaps. If it’s the number of people thinking of buying or who would like to buy: that’s a bullshit figure. Outside the unfortunate Asian students getting rorted by dodgy landlords stuffing them 3 or 4 to a room in the high-rises around Chinatown in Sydney I think density of living is pretty low in Sydney at least. I know of lots of people with spare rooms or a couple in a 2 or 3 bedroom flat that could quite easily move someone in if rental prices rose too much.

Never mind Sydney (and other places) have got a tonne of “kidults” (adult age, but never left home and don’t tend to pay bills, proper rent etc) perpetually living at home because they think that to move out of home they MUST buy a property (in amongst their instant CEO position at their first job). That’ll somewhat dent any future profits having to pay food, electricity etc for your useless 35 year old kidult sponging off you until you die.

The future?

Well, the USA has pioneered the concept of a “strategic default on mortgage“, I’m not sure that’s as much of an option in Australia because you can’t just put the keys in the mail (“jingle mail”) to the bank and walk away.

If we get higher interest rates perhaps that will make saving more attractive.  Those of us with savings currently are enjoying our 6 something percent returns on savings accounts that we can withdraw in a day or two (versus 6 months +) when needed or investing in the stock market (which at least has the honesty of an investment choice able to acknowledge it goes down on occasion). The sooner we start affording people the same tax advantages as negative gearing the better: we might get away from burying ourselves in debt.

As a thought for the future: it’d be nice if people were pouring money into research/development rather than property. Or banks devoting more time to business loans instead of housing mortgages (as one NAB banker said recently).

If ever there was “dead money” as far as the history of mankind is concerned it’s buying and selling land to keep up with the Joneses. Inventing things, solving the problems of the world: now there’s money that’s doing something.