The Banking Ombudsman has seen a significant rise in complaints about mortgage break fees in the past two months, as shocked homeowners discover the true cost of getting out of fixed-term loans.
Janine Williamson, of Wellington, is disputing the $12,000 Westpac has charged her to break her $207,000 mortgage - a fee her branch had said would only be $2000. The branch manager has offered her an interest-free overdraft to pay the fee.
Late last year Ms Williamson wanted to buy a new house before selling her existing home, but Westpac would not finance the transaction. She went to BNZ for the loan and put in an offer on the Whitby property.
On November 13, Westpac Porirua told her it would cost $2000 to break her existing $190,000 and $17,000 mortgages, both with three years left to run. "I said, 'I need to make sure it's no more than that because my finance depends on it'."
Then in early December, four days before the property was due to settle, Westpac told her the break fee would actually be $12,000 because it was calculated on the bank's wholesale costs.
Ms Williamson said she had never been told that, and could find no reference to it in her mortgage documents.
She has since had several letters from the bank demanding payment of the overdraft, and says despite numerous phone calls she has not heard from the institution's advocacy section as promised.
Ms Williamson said she wanted to resolve the matter amicably, and was prepared to return her business to Westpac - she is on a six-month term with BNZ and has since sold the first property - if it wipes the extra $10,000.
Westpac spokesman Craig Dowling said the information about how break costs applied were in the bank's mortgage documents, along with an offer to provide the formula for how the break fee is calculated if mortgage holders wanted it. In addition, a copy of the formula and examples of how it works were on the bank's website.
He said the bank could not comment on individual customers' transactions, but "a key area where dispute remained was around whether or not Westpac did offer any initial assessment of cost as suggested".
Asked why the branch manager would offer her an interest-free overdraft if there was not some culpability on the bank's part, he said: "Such an action is taken only in extreme circumstances such as to help a customer progress a settlement as desired while allowing time to look into issues that are in dispute."
He said it was not an acceptance of culpability.
Banking Ombudsman Liz Brown said there had been "problems on virtually all fronts".
She said it was confusing that the formulas for calculating break fees were not standard, with some banks such Westpac and Kiwibank charging homeowners for their cost of wholesale funds over the remaining term of the loan. Fees worked out on wholesale rates were "much less transparent, much more difficult to find out information about, and much more difficult to explain".