The Gillard Government welcomes moves by the National Australia Bank to open up a new front in the pricing war between Australia's big banks which has continued to intensify since December last year when the Government acted to boost banking competition.
The NAB is now undercutting its major bank competitors by over a full percentage point on mortgages through its online UBank channel. This represents a potential saving for a family with a $300,000 mortgage of up to $245 a month or $2,942 a year in repayments if they switch from another big bank.
The big banks know that exit fees are a major barrier to competition in banking – which is why the Government has taken action to abolish exit fees on new loans from 1 July this year.
Two of the big banks have now completely abolished their mortgage exit fees for all customers in response to our initial crackdown on unfair exit fees. The other big banks have since retaliated by slashing their mortgage fees or actually offering cash to encourage customers to switch.
The Government's actions mean banks that try to take their customers for a ride can expect to be punished by losing customers, and banks that offer the best value can expect to be rewarded with new customers walking through their doors.
Abolishing exit fees helps make the banking system fairer for families, which is why Joe Hockey must immediately dump his plans to "stridently oppose" the Government's ban on exit fees of up to $7,000 in the Parliament.
The Government is introducing three broad streams of reform to empower consumers to get a better deal, to help smaller lenders put more competitive pressure on the big banks, and to secure our financial system so it can continue to provide a sustainable flow of credit to households and businesses.
These reforms build on the Government's decisive action during the global financial crisis to secure our financial system and preserve the competitive foundations of Australia's banking sector.
Vigorous competition is the best way to create a system that offers real choice for consumers, and we're already seeing strong evidence of competition getting Australians a fairer go in banking.
A competitive and sustainable banking system is a key part of the Gillard Government's broad economic agenda, and continues our record of strong and responsible economic management.
23 May 2011