mortgagecorp.com.au

THE Federal Government is considering banning bank “exit fees” to help borrowers frustrated by the failure of lenders to pass on interest-rate cuts.

The Government is furious at the banks’ refusal to pass on the most recent 0.25 per cent cut in full, accusing them of “hijacking” monetary policy as the Reserve Bank tries to free up cash in the economy.

The sources said that if the banks continued down this track Cabinet would examine other measures to increase competition in the highly concentrated sector.

The sources declined to outline the measures “at this stage”, but Assistant Treasurer Chris Bowen said he was seriously considering including punitive bank exit fees in a banned list covering unfair contracts.

They would be part of a bill Mr Bowen plans to bring to Parliament in June. Draft legislation will be published next month.

Editors Note: This is a double edged sword, its great for the consumer, clearly the RBA and the Government wants their monetary policy adjustments to reach the street and by reducing loan switching costs they will ensure that banks need to remain competitive, however the Banks are experiencing margin pressure, you only have to look at the deposit rates on offer and he mortgage rates to realise they are not that far apart, the big issue here is how are smaller banks going to compete going forward as depositors make a move to larger “safer” banks at the expense of the smaller banks.