Mortgages. Why people are dissatisfied with the banks, and why the banks don't care..

Mortgage rates may rise above any official cash rate increase, according to many banks. The Government does like it, customers don't like, but the banks don't care. They have us "by the short and curly's."

You may have read the recent report by Choice that the big banks in Australia are on the nose with their customers.

People like the fact that we have a stable banking and financial system, and that their banks have been the rock in the global financial crisis.

But I guess its something that Australians expect from their banks.

The thing that gets under our skin is that Australia's Banks are the most profitable in the World, and while we can't deny they are well run, the real reason for this is the lack of mortgage competition that Banks face in Australia.

And that will lead to the banks taking their customers for granted. And in my opinion they do just that.

The fees and charges that they have been charging us for the last ten years or so, have in fact been in my view unlawful.

But we have let them get away with it, so they get on adding them.

Building societies and credit unions on the other hand are well liked by their customers.

They treat their customers as if they owned the business, and they do. Once you have an account with a building society or credit union, you become a joint owner of that organisation.

Banks do have mission statements that make their customers 'stakeholders'. This however is often meaningless when the share prices take a hit, and the the top officers of the banks get rewarded when share prices rise. And the easiest way to do that is to make more profit on every customer.

What we need to do is to tell the banks when we are not happy, and if you are not heard, then to move your account.

More competition in the Mortgage space is required.

The Treasurer Wayne Swan has been sniping at the banks about mortgage rates, and trying to hold them to official rate rises only.

But customers making a stand and competition are the key to lower mortgage rates.

You probably didn't notice, but Australia's mortgage brokers and securitised mortgage lenders have become largely irrelevant leading up to, and during the Global Financial Crisis. They just couldn't rise the funding to remain competitive with the banks.

Wayne Swan is trying to support the securitised mortgage lenders and has just pledged a further $8 billion dollars for mortgage funding. But that is just a drop in the bucket.

We need to understand that more is required.

Mortgage competition has collapsed in Australia

Mortgage brokers have gone from 40% share to 20% share of the mortgage market, and worse, mortgage originators have fallen from around 25% to just 2.5% of the mortgage business in recent times, and that is the issue.

There is no reason for banks to worry over the next two or three years. The competition has been vanquished and there is no one on the horizon to challenge them.

So what will you do about it? Get your bank to reduce your fees, move to a building society or credit union, get your loan refinanced by a mortgage originator, or just cop it sweet?