MORTGAGE holders will be able to compare costs for switching banks with an online calculator launched by the Australian Securities and Investments Commission.
The move comes ahead of a series of banking reforms that Treasurer Wayne Swan has promised will be released later this month.
ASIC launched the new tool which allows mortgage holders to assess whether changing mortgages will help them pay off their home loan faster and how long it will take them to get ahead after paying an exit fee to their previous financial institution.
A mortgage exit fee can be as high as $1000 and the cost has led to a brawl between banks and Mr Swan in recent months.
Last month ASIC changed the rules for banks, restricting them to charging exit fees that reflect the cost to them of closing a mortgage early.
Concerns had been raised that banks were charging excessive mortgage exit fees to stop people refinancing when they found a better deal.
ASIC chairman Tony D'Aloisio says the regulator has seen a sharp increase in the inquiries it has received about switching home loans in recent months as interest rates have risen.
"Recent interest rate rises have been hard on borrowers," he said. "Until now it's been difficult to work out whether another loan would leave you better off after all the exit and entry fees.
"Shopping around could save borrowers thousands of dollars in repayments.
"We've noticed a large spike in inquiries about bank switching and exit fees in the last couple of months."
Mr Swan said the calculator would help Australian families assess the savings they could make by switching to a more competitive offer.
"I've been working closely with our regulators for some time now to develop a package of new reforms to help build up more competition in the banking system, and I'll release those reforms this month," Mr Swan said.
The tool allows mortgage holders to input details of an existing loan, including the exit fee, and compare it with any new loan they are offered.
The calculator will then tell mortgage holders how long to wait before a cheaper loan will represent an overall saving after switching costs, which loan will be paid off faster and what can be saved in minimum monthly repayments.
Mr Swan is being pushed to withdraw the Government's deposit guarantee for the big banks and extend it for building societies and credit unions.
The controversial move is intended to divert billions into smaller lenders, enabling them to grow their mortgage businesses and provide a real alternative to the big four.
The idea has been put forward by Mark Bouris, head of Yellow Brick Road, the financial services company, in its submission to the Senate inquiry into banking competition.
Mr Bouris met with the Treasurer on Friday and afterwards Mr Swan told The Sunday Telegraph he admired Mr Bouris's business model and wanted to see more like it.
Yellow Brick Road has a partnership with Gateway Credit Union, which involves taking Gateway's funds, rebranding the money as Yellow Brick Road mortgages and distributing them through YBR's 45 branches.
Mr Swan is considering a variety of measures to increase the market share of mutuals.
