Starting July 1, mortgage exit fees for new home loans in Australia will be removed in line with efforts to overhaul banking laws.
The move will allow the Australian Competition and Consumer Commission to look into any possible price signalling between National Australia Bank, Westpac, ANZ and Commonwealth Bank. Price signalling is the practice by which banks flag changes to their home-loan interest rate in advance, thus prompting competitors to follow and ultimately reduces competition.
Banking reforms will also involve the federal government creating an official symbol certifying that credit unions, building societies deposits and smaller banks are government guaranteed.
“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,” said Treasurer and acting Prime Minister Wayne Swan. “We’ve worked long and hard on these reforms with our regulators to make sure that they are effective, enduring and don’t let the big banks off the hook.”
The changes in mortgage exit fees have gained support among home loan holders, with nearly 40 percent wanting to change lenders, according to a survey conducted by Newspoll.
Paul Ryan, who founded Intouch Home Loans, said eliminating exit fees would prompt lenders to either increase interest rates or go back to application fees of $1,000 to $1,500. “If somebody’s taking away your income, you’ve got to find new ways to make that back, one way is an application fee or an interest rate increase,” said Mr. Ryan who spoke to Perth Now.