MFAA releases white paper recommendations for home loan discharges

The Mortgage & Finance Association of Australia’s (MFAA) new white paper report – Towards a faster, smoother home loan discharge: Benefits for borrowers – has brought forward six recommendations for the purpose of improving the home loan discharge process for consumers.

According to the MFAA, the white paper has been informed through roundtable conversations with MFAA broker members across the country and the research emphasised that removing inefficiencies in the discharge process is “about removing the friction from the customer experience”, thus leading to better outcomes for competition and borrowers.

The report also highlighted the levels of refinancing activity reached in July 2023, which totalled $21.53 billion, reported by the Australian Bureau of Statistics (ABS), and emphasised the importance of brokers being involved in the home loan discharge and refinancing process due to their “knowledge of a broad spectrum of home loan products from a significant range of lenders”.

The six recommendations the white paper has brought forward include:

1. Improving efficiency in the discharge process to encourage more borrowers to switch lenders if it’s the right option for them.

2. In all instances, brokers should be able to act for a customer in the discharge process if the customer provides consent.

3. Implement a simple-to-use and easy-to-find standardised mortgage discharge form.

4. Reduce the time it takes to process a discharge form and complete the switch to another lender.

5. Lenders should offer their best repricing offer upfront, eliminating the need for retention activity once a discharge form is lodged.

6. Automate and digitise the discharge process as much as possible, for example, by accepting electric signatures or online editable forms.


Speaking on the recommendations, MFAA chief executive Anja Pannek explained that the white paper’s purpose was to highlight the continued hurdles and opportunities within the home loan discharge process.

“Our research highlights that removing inefficiencies in the discharge process should be
focused on removing the friction from the borrowers’ experience, this will result in improved
competition and better outcomes for borrowers,” Pannek said.

“From missed settlements to clients having to pay more in fees and interest, the
consequences of the current cumbersome home loan discharge process raised by our
members at our roundtables made it clear that change is needed and will make a material
difference to Australian borrowers.”

Pannek further stated that there has been “minimal improvement” to the home loan discharge process since the Australian Competition and Consumer Commission (ACCC) Home Loan Price Inquiry in 2020, something the association has been “consistently vocal” about since the inquiry was made.

However, Pannek stated the MFAA is “pleased the government is now giving the ACCC’s report the attention it deserves”.

“At the time of the Inquiry we recommended the introduction of a standard discharge form
and maximum turnaround time to process a loan discharge request, and we continue to
advocate for these simple changes in this white paper,” Pannek continued.

“But, there is also more that can be done to assist borrowers to refinance. In the current
challenging economic environment, it is imperative that borrowers are able to switch lenders
easily.”

The inquiry was commissioned by the Morrison government in October 2019 and reviewed the mortgage pricing process. It made four recommendations to ensure the pricing practices of Australia’s financial institutions were more transparent and better understood.

Some of the ACCC’s inquiry was cited in the recent recommendations released by the House standing committee on economics’ final report from its inquiry into promoting better competition and transparency in the mortgage lending market.

The Better Competition, Better Prices report put forward 44 recommendations to the government after 14 months of evidence gathering and analysis from numerous sectors of the economy.

[RELATED: Mortgage changes recommended by economics committee]