Commonwealth Bank Ups the Ante

In a move almost forcing a government response, the Commonwealth Bank followed the RBA's announcement of a .25% rate rise with an immediate .45% rise! The banks say they have to do this because of the cost for them to borrow money, but then they declare huge profits so it's hard to accept their argument.

There is much debate between the politicians on how to prevent this, but no action. Wayne Swan said last month that he was "looking at tougher powers to increase banking competition".

Banks are not like retail shops. Bank customers can't just walk into the shop next door when the shop they normally use raises its prices. Bank customers own mortgage for many years and moving to another bank involves large fees that are difficult to quantify in advance. There is no point moving your account unless you can be sure the other bank is going to keep their rates lower for long enough to cover those moving fees.

Surely the simplest solution is just to forbid banks from charging more than the actual cost of doing the paperwork when mortgage holders move their accounts elsewhere. Then a bank would have to try to retain its customers, instead of just milking them.