Government launches home loan watch

Published: October 19, 2008 - 08:53 PM

Government launches another consumer website

By Amanda Edmonds

A new website will be set up by the Federal Government where homebuyers can compare varying mortgage costs over time, under proposed plans reported by the Age.

The scheme, similar to FuelWatch and GroceryWatch, will increase competition between the lenders and give consumers more information so they can make informed choices.

The Australian Securities and Investments Commission (ASIC), under Treasure Wayne Swan, will set up the site which unlike others, will give consumers the total cost of various schemes, including exit fees, over a defined period.
"We have consistently said that we want the banking system to work for Australian families not against them," Mr Swan told The Sunday Age.

The website is a result of concerned consumers who are being forced into staying with their home loan by the high exit fees, which in some cases can be thousands of dollars if cancelled early.

Gordon Renouf, director of policy at consumer group Choice, said the website was a good idea in theory, but fails to address the underlying issue of high exit fees. These fees are often overlooked by consumers searching for the cheapest mortgage, despite research indicating that about half of all mortgage customers eventually end up paying them.

All the major banks, Westpac, St George, ANZ, National Australia Bank and the Commonwealth Bank charge these fees.

ASIC has found that early termination fees account for about 42% of total fees earned by the banks, compared to 19% in 1995, suggesting that many lenders are able to charge lower interest rates by having higher fees.
The government is still urging customers to “vote with their feet" with Mr Swan writing to the major banks instructing that they must have services available that make switching to another bank easier by the start of next month.

Unlike in Britain, Australians considering taking out a home loan currently have no way to gauge the actual cost of the home loan over a defined period of time.

The government’s new initiatives will at least enable consumers to shop around for the cheapest interest rate on mortgages and compare the real cost of home loans. With the global crisis in full swings and only the big four banks Westpac, Commonwealth, ANZ and NAB actually lening funds shopping around for a great home loan deal will be more important than ever.

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