The federal coalition has seized on internal Treasury documents to dump on Labor’s plan to ban mortgage exit fees.
Opposition treasury spokesman Joe Hockey says the emails from Treasury officials, released under freedom of information laws, prove Wayne Swan isn’t fit to be treasurer.
"The treasurer is now condemned by his own Treasury’s words," Mr Hockey told reporters in Canberra on Tuesday.
"The proof now comes out from the Treasury that (banning) exit fees will increase interest rates and contribute to higher costs for banking customers."
Labor wants to outlaw exit fees after 12 months on variable loans for new mortgages, although many banks already have abolished them preemptively.
Mr Hockey has long argued banning the fees could lead banks to recoup lost revenue through other means.
The Treasury emails, released on Monday, suggest there are pros and cons to Labor’s proposal.
On the positive side, banning exit fees would make it easier for consumers to switch banks and compare products.
It would also provide a "common market benchmark" for all lenders.
But there’s a downside as well.
"Banks are likely to move to recover the legitimate costs associated with establishing a mortgage through other means (eg higher interest rate, higher other fees – eg establishment fees)," the emails state.
The move could also penalise consumers who don’t want to transfer their mortgage "as they are likely to end up paying higher prices and cross-subsidising the switchers".
Mr Hockey said the documents showed Mr Swan wasn’t fit to be treasurer.
"This is the most damning piece of evidence against Wayne Swan’s competence that has ever been released by the Treasury."