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Home borrowers will be given a one-page fact sheet outlining their monthly mortgage repayments, under new banking reforms.
Exit fees, which can run into the thousands, will also be banned from July 1, 2011 and the Australian Competition and Consumer Commission will be given the power to investigate price collusion among banks.
The federal government has also pledged to spend another $4 billion on residential mortgaged-backed securities to help smaller lenders, taking to $20 billion its investment in non-bank players since the onset of the global financial crisis.
In another development, former Reserve Bank governor Bernie Fraser will conduct a study into how technology can be harnessed to make it easier for consumers to move between deposit accounts and mortgages.
In a bid to boost competition in the lending market, credit unions and building societies will for the first time be allowed to issue covered bonds.
The government has also promised to accelerate the development of a 'bullet' residential mortgage-backed securities market for smaller lenders.
These products cannot be paid off early, so they can be sold as a long-term fixed-income investment as a way of giving smaller mortgage players a new income stream.
Lenders will be required to issue a fact sheet which spells out how much a borrower would actually be paying back over the life of the mortgage once fees and interest are accounted for.
The reform would make it easier for borrowers to compare home loans between lenders.
The fact sheet would also list websites so consumers can compare mortgages.
Labor has promised to introduce legislation to ban exit fees from July 2011.
While ANZ scrapped these charges in November, the big banks charge up to $900 while some smaller non-bank lenders demand up to $7,300 from borrowers for the privilege of switching out of a loan.
The government says the Australian Securities and Investments Commission would take banks to court if they tried to lock borrowers into a loan before the exit fee ban came into effect.
When it comes to anti-competitive practices, the ACCC will be given the power to prosecute bank executives signalling to competitors, through the media, that they would follow their competitors if they lifted their lending rates.
Treasury and the Reserve Bank will form a taskforce to monitor ATM fees.
The taskforce would also be required to report to the government, by June 2011, on teller machine fees charged in remote indigenous communities.
In early 2011, the government will launch an awareness campaign explaining how regional banks, building societies and credit unions offer a competitive alternative to the major banks.
'The Gillard government will take action to help build a new pillar in our banking system from the combined competitive power of our mutual credit unions and building societies,' the government said in its banking reforms booklet.
This will include the introduction of a 'government-protected deposits' symbol to identify deposits that are secure.
Credit card reforms will also be introduced in 2011, preventing lenders from charging over-limit fees unless consumers specifically agreed to allow their account to go over the limit.
The government has also vowed to change the Banking Act 1959 to allow banks, credit unions and building societies to issue covered bonds.
The reform is designed to channel superannuation savings into the financial system, in a bid to enable lower-priced credit to households and businesses.
The feasibility study into enabling consumers to more easily switch between deposit accounts and mortgages would examine a system of account number portability, which doesn't presently exist.
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