Australia's banks will need to review all their mortgage exit fees on existing and new mortgages following the release of the Australian Securities and Investments Commission's (ASIC) guidance, bankers said.

Yesterday afternoon, the corporate regulator released the paper: "Guidance for Mortgage Lenders on Early Termination Fees," which it says was designed to stop banks profiting from exit fees.

Under the new rules, banks will not be allowed to charge consumers more than the amount they spend transferring the account to a competitor. Clients will also be able to appeal to two industry-funded ombudsman services or complain to the regulator regarding exit fees.

But the Australian Bankers' Association (ABA) maintains that exit fees are fair.

ABA chief executive Steven Münchenberg said: "The ABA has always argued that mortgage exit fees are based on legitimate costs incurred by banks and this has been recognised by ASIC."

"However, we believe ASIC has defined costs too narrowly, because it is excluding certain legitimate costs such as product development, marketing and mortgage-related business overheads."

"Also, ASIC is limiting the ability of lenders to recover any increased costs that occur after the loan has been taken out."

It will be a matter for individual banks on how they respond to this guidance from the regulator, ABA said.

Prior to the release of ASIC's guidance, ANZ bank had announced it will abolish its deferred establishment fee, more commonly termed an exit fee. It is also dropping fees for customers switching to a special three-year fixed loan it is offering.