THE Rudd Government is considering outlawing exit fees onmortgages so that banks canno longer punish home owners who choose to switch to a better deal.
Wayne Swan, who last week attacked banks for lifting interest rates by up to 0.2 of a percentage point, has asked Treasury for a report on how to increase competition between the financial institutions.
Suncorp yesterday became the fifth bank to ignore the Treasurer's warning that rates should not be raised by more than 0.12 of a point because of the global sub-prime crisis.
The Queensland-based bank from today will add 15 basis points to its variable rate, taking it to 8.72 per cent and effectively adding $20 a month to repayments on an average loan.
Exit fees have become a standard clause in home loan contracts, with penalties applying when borrowers switch from variable to fixed-rate loans, refinance with other lenders or pay their loans out early.
Australian Bankers Association chief executive David Bell said refinancing loans was easy under the present system.
But Mr Swan said through aspokesman yesterday that this was not the experience of borrowers.
"We believe it's a serious issue that Australian families confront and that's why we are committed to doing everything we can to remove barriers that stop families voting with their feet to switch banks if they are unhappy," he said.
The decision to switch banks can cost customers between $700 and $2000, which consumer experts said was too expensive. A schedule of fees compiled by InfoChoice shows customers are slugged, especially if they have held their loan for less than four years.
Most of the banks have designed an exit fee and then an early termination fee, for which ANZ, CBA and Westpac charge $700. Breaking the loan early for customers of NAB costs about $900, while St George's fees are steeper, at $1000.
The exit fee component ranges from $160 at ANZ to $250 at Westpac and $350 at StGeorge.
The fees charged by non-bank lenders, which have raised rates by more than their banking rivals, are more expensive, with RAMS charging $295 to switch and Mortgage House slugging departing borrowers up to $2495.
A number of competitors in the bank and non-bank sector charge customers a percentage of their outstanding loans, with some as high as 2 per cent.
InfoChoice general manager Denis Orrock said the costs meant it could take home owners two years before they got the benefit of switching.
Mr Orrock said Mr Swan's proposal to force banks to scrap exit fees was a shift back to regulation.
"If the Treasurer wants to do something, he is going to have to re-regulate across the board," Mr Orrock said.
"It is not just the banks but the non-bank lenders, as well. There are two fees which hit people the most - the exit fees and the early termination."
The ABA's Mr Bell said he did not think the present fee structure was excessive and that customers were warned before signing up.
"There are costs associated with home loans for a very good reason: when a mortgage is established to a new customer, the banks have to make sure the people can pay it back," Mr Bell said. "The fees are disclosed to customers; it is made very clear."
Opposition Treasury spokesman Malcolm Turnbull said the Government should increase the pressure on the major banks to justify the recent run of rate hikes. "Wayne Swan has been treated like a mug by the banks," he said.
