Government 'may abolish bank exit fees'

The government is considering taking steps to ban exit fees.

Following a failure by many banks to not fully pass on the latest interest rate cut by the Reserve Bank, cabinet sources have told the Sunday Mail that the Rudd administration is mulling over whether to prevent the exit charges on mortgage and other products in an effort to free up cash to boost the economy, something that could be of particular interest to those looking to switch products to low interest home loans.

Chris Bowen, assistant treasurer, reveals such fees could be placed on a banned list of unfair contracts in a bill set to be put forward to parliament later this year.

"We are working through the detail at the moment as to how specific the legislation should be. I have yet to reach a decision," he states.

If given the go-ahead, the legislation would also see the removal of service fees, default fees and penalty fees, as Mr Bowen claims the issue of such charges has become an increasing area of concern over recent weeks.

Earlier this month, Westpac revealed that following the 25 point cut from the Reserve Bank, it would reduce rates on its home loans by ten basis points.

This would see its variable home loan interest rate be lowered to 5.81 per cent.

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