Interest Rate battle "gets personal"

The SMH reports that the Treasurer Wayne Swan has phoned bank bosses directly to vent his anger over rate rises. Joe Hockey responds that the government can huff and puff all it wants but the bottom line is that the banks are treating the Australian government with the same contempt that they show the Australian people.

The Council of Small Business Organisations proposed single bank account numbers so customers can more easily shift accounts from one bank to another, in the same way the telecos were forced to allow people to retain their phone numbers when they switched suppliers.

However until banks are prohibited from charging unjustifiable mortgage exit fees, it remains impossible for a customer profitably to move a mortgage to another bank just to benefit from a slightly lower interest rate. It seems to me it's those UMEFs that need to be banned.

In July 2010 the ASIC released a consultation paper on new laws regulating mortgage early exit fees which are unconscionable or unfair. Under the National Credit Code, early exit fees which are unconscionable can be annulled or reduced by a court. Under the Australian Consumer Law, an unfair term requiring an early exit fee to be paid can be declared void. ASIC also has a number of new enforcement powers under the new consumer law provisions in the Australian Securities and Investment Commission Act 2001 (ASIC Act). But it all boils down to the fact that to take your mortgage to another bank the exit fee must be less than the benefit from the reduced interest rate. That needs exit fees far less than those "unconscionable or unfair" fees covered by present regulations. Rather, the banks should only be allowed to charge exit fees that match the actual provable cost of transfering your mortgage.