Government considers scrapping bank exit fees
Tuesday February 19, 2008
The Rudd Government is looking at ways to make it easier for borrowers to change banks by exploring the possibility of scrapping bank exit fees.
This move has been prompted by some banks raising interest rates by more than the 25 basis points, which was instructed by the Reserve Bank of Australia (RBA) after their February board meeting earlier this month.
Presently most of the major banks and other financial lenders in Australia have a termination clause written into your home loan contract that charges consumers up to $2,000 to end their contract should they wish to change banks fo rany reason.
With it a costly exercise to change your home loan to a more friendly bank offering you a better interest rate on your home loan, the governments decision to look at scrapping exit fees will make the home loan market even more competitive with consumers able to get the best home loan available on the market without being penalised because their bank isn't being competitive.
Treasurer Wayne Swan has asked Treasury to produce a report on how to increase competition between banks.
The Treasurer says the Labor Government is committed to making it easier for borrowers to switch banks by removing obstacles such as exit fees.
Not surprisingly, Australian Bankers Association's Mr Bell did not believe the current fees charged by banks was excessive and that customers were warned of exit fees before agreeing to the loan.
Some banks charge not only exit fees but also an early termination fees for customers, which change banks within the first few years of taking out a mortgage finance loan.
Many non-bank lenders charge even steeper fees to people who change financial institutions before their loan has been repaid.
The Opposition Treasurer Malcolm Turnbull has attacked the Labour Government for not making major banks justify the recent run of rate hikes, which in some cases have exceeded the Reserve Banks recommendation.
Opposition Treasurer Mr Turnbull might wish to take a moment of his precious time and explain why it is that banks have prospered so much after the job done by former Liberal Treasurer Mr Costello.
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