Andy, yourself are basing your case on the fact that the banks are re lending someones deposits when issuing mortgages;

"Break fees are limited by the Credit Contracts and Consumer Finance Act 2003 to a reasonable estimate of the loss a bank suffers arising from the repayment in effect the foregone repayments the borrower would have made, which covers both the cost of the money the bank borrowed (from depositors or on international money markets) to make the loan, but also its foregone revenue."

Andy you claim it is yet another example Kiwi's lack of understanding of financial matters. You are correct, if Kiwi's knew that the money they were being loaned and expected to pay back over a period with compounding interest, if they knew that money did not exist, but was written into creation out of freshair only when they signed the dotted line and promised to repay it, as has been admitted many,many times now by the bankers themselves, would you still maintain they should be able to gouge the guts out of you when the loss was only superficial, because you cant ever lose if you get to create it out of nothing.

We should be taking a national class action and suing them.

http://www.webofdebt.com/articles/dollar-deception.php

Those developers have been scammed. They will end up selling them at cents on the dollar what they recently got conned into borrowing to buy them for. They will have them sold out from under them by the banks to some cashed up insider who once again got out of the last boom with miraculous timing just before it came tumbling down. The developer will be left with residual debt, the forward purchases burned, Roger Kerr will scream "caveat emptor" and the unaware populous with go "that will serve the high flying dreamers right"
Its great to be living in the land of the free!

Im no expert in what the actual losses to the bank are
But in simple terms, I would imagine the $ difference in the 2 rates over the remaining term of loan would get one into a ball park figure.
When the free is some 3 to 4 times that figure, that I imagine to be rather excessive.

I do agree in principle to what Any says above in his post
But
"Its all in the fine print when you sign up - just read the bl++dy stuff before you sign."

Yes one can do all the reading and understanding one likes, but at the end of the day one doesnt have any choice to but to sign , other than to sell ones home....not sign.

I dont think the issue is that there should not be fees to break the loan, but the fees are excessive, and in some cases excessive to the extreme with a huge profit added.

Personally it doesnt matter if we personally stick to the higher interest for the next 18 months, the extra interst over the current rates is less than 1 weeks income, hardly worth the time to drive up to the bank....
It is the Principle of having no choice to negoiate the break clause, and forced to agree to an ecessive formula that amounts to exortion.

With regards to reading the fine print, nothing should alter the fact that some banks in particular are charging 3-4 times the amount of other banks!
A friend of mine just requested a bank fee break cost for her mortgage from BNZ, her mortgage is around $350,000, they quoted her $8000.00 to break out of her mortgage and go to a lower rate. My mortgage is $219,000. Westpac has quoted me a whooping $26,000 to break out of mine! We have the same term left give or take a couple of months, and we are on the exact same interest rate.
Fair enough banks have to charge a break fee, but this is just wrong to have such a huge difference.