Mortgage break fees 'reasonable'

Home owners hoping for compensation from their bank after being stung with high mortgage break fees may be out of luck after an investigation by the competition watchdog found most banks were charging reasonable fees.

The Commerce Commission began investigating the banks and a number of financing companies in October 2008, after complaints were made about banks charging large fees for breaking fixed-rate mortgages after interest rates plummeted in late 2008 and early 2009.

Yesterday it released the results of the 18-month investigation which found the ASB, SBS Bank, BNZ, National Bank, ANZ and GE were likely to have charged reasonable fees.

But KiwiBank and HSBC were both issued with a warning over the formulas used to calculate fees.

Graham Gill, the Commerce Commission's fair trading manager for Auckland, said Kiwibank and HSBC had failed to take the time value of money and reducing loan balances into account for fee calculations, which meant the banks were likely to have breached section 54 of the Credit Contracts and Consumer Finance Act.

The act allows creditors, such as banks, to charge customers a reasonable estimate of their loss on full repayment. Mr Gill said both banks had changed the way they calculated fees halfway through the investigation, correcting the issues raised and compensating people who had overpaid fees.

Kiwibank had paid out $689,000, while HSBC had paid out $113,000.