Following a spate of major banks’ interest rate hikes independent of the Reserve Bank of Australia (RBA) cash rate rises, a Government package making it easier to switch home loans could pave the way for increased business in the mortgage broking sector as borrowers start looking for better home loan products.

The package of measures to make it easier for Australians to switch banks if they are not satisfied with their current provider will be implemented immediately.

Implementation of the switching service will be overseen by the RBA to ensure government requirements are met. This service will be operational by November 2008, with interim arrangements in effect before this time.

This means the listing and switching service will be operational in the coming weeks in an interim form, which involves banks providing written advice and support until IT systems enable full implementation by November 2008.

Federal treasurer Wayne Swan said there were currently too many administrative and other obstacles for Australians to confront if they wanted to change banks.

“We have encouraged Australian families to judge their banks and exercise choice by voting with their feet and changing providers,” he said.

The four bank switching initiatives were developed following intensive consultation with regulators, banks, credit unions, building societies and consumer groups and includes:

• A listing and switching service which requires banks to provide their customers with accurate information on all direct debits and credits to take to a new bank for easier transferral, if they switch. Banks will also be required to assist new customers to re-establish their direct debits and credits.

• One single consumer complaints hotline 1300 300 630, providing a first contact point for all consumer complaints about basic banking products – to be provided and maintained by the Australian Securities and Investments Commission.

• Comprehensive consumer education resources, including a detailed and informative web site providing advice on how to switch, and the costs and benefits of doing so, on www.understandingmoney.gov.au

• An ASIC-led industry review of entry and exit fees that apply to mortgage accounts, shining a light on fees, putting downward pressure on them, and providing better information to consumers to inform their switching decisions.

The account switching package is expected to reduce unnecessary barriers to customers changing providers and increase consumer awareness of financial services products and their costs.

Lending Central