Mortgage customers in Australia will be able to switch home loans without penalty starting mid next year, as Australia Treasurer Wayne Swan announced on Monday the government’s plan to ban mortgage exit fees beginning 1 July 2011.
According to the Sunday Age, the much anticipated banking competition package will give the Australian Competition and Consumer Commission more authority to stamp out anti-competitive behaviour by the country’s big banks.
Additionally, the government is also launching “government-protected deposits” symbol in a bid to help smaller lenders reclaim a larger share of the mortgage market.
The symbol is designed to comfort mortgage borrowers and assure that their money is safe with building societies and credit units, just like those with the big banks. The symbol is also part of a larger plan to make smaller lenders a “fifth pillar”, in addition to Australia’s big four banks.
However, this new measure will surely anger the banking sector, as they argue that banning mortgage exit fees would force smaller lenders to increase other mortgage charges.
But Mr. Swan noted he wanted to allow mortgage customers to “get a better deal and help smaller lenders put more competitive pressure on the big banks to do the right thing by their customers.”
“Competition is the best way to keep interest rates lower over time, and helping Australians walk down the road and get a better deal if their existing lender isn’t looking after them is crucial to that,” he said.