Australia announces mortgage rates reforms to help small banks and credit union

By on Dec 12, 2010 in Australia, Banking, Business Comments

Australia, through Treasurer Wayne Swan announced its bank mortgage rates reforms, which aims to help local banks and credit unions in raising more funds easier, particularly the smaller ones.

As published in Australian news sites, the move announced by Treasurer Swan will be achieved by allowing financial institution to cover bonds, which will happen for the first time in its history.

Retail investors will also be allowed to buy government bonds which will be through security exchange trading, while a $4-billion investment will be injected to be a key source to fund smaller lenders, as promised by the Treasurer.

“We’ve worked carefully and methodically with our financial regulators to develop a package of reforms that will be effective and enduring, and won’t let the big banks off the hook.” Mr Swan told the news on Sunday.

Commonwealth Bank of Australia, National Australia Bank, Australia and New Zealand Banking Group, and Westpac Banking Corporation, are the big banks that were reported to be controlling about 8% of the home-loan market, or $1.1 trillion.

Apparently, this action by the Australian government was to pacify the angry public after banks declared a huge mortgage rate above the benchmark provided by its Central Bank.

In addition, a ban to exit fess on new home loans will be implemented starting July next year, which is said to allow customers to change lenders, and therefore may boost in the lending sector.

However, The Australian Bankers Association, which represents the major banks, cautioned the government on its mortgage reforms plan and noted that the lending industry is already competitive.

The big banks also insisted that removing the loan exit fees may even hurt smaller lenders.

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