Essay example --

Most of Australians are affected by housing loans. 70% of homeowners buy a house in Australian through the housing mortgage loan. Due to the optimistic attitude of the general public about the economic situation, a lot of people buy houses for renting out to obtain stable income. In 2010, the Australian Government authorized the Australian Securities and Investment Commission (ASIC) to regulate exit fees that banks were seeking to impose. The exit fee is the payment that banks require customers to pay for permission to transfer their home loan to another bank, which considers the housing loan being one of the most important factors in exit fees or "terminate†. In an article of The Times, it was reported that an exit fee of $5,178 was charged if a loan of $300,000 was borrowed for 25 years and terminated within 3 years (Martin, 2010). Such an expensive exit fee makes high switching cost for the house loan takers, through which the bank may gain market forces. This article will discuss the switching costs in Australian home loan market and analyze how these switching costs may increase market forces of suppliers in these markets. In addition, this article tries to find out that after exit fees is changed according to the new regulations, what the changes of supplier cost will be and whether their profits will increase or decrease. Switching costs in Australian home loan market â€Å"Switching costs "was first presented by Michael †¢ Porter in 1980, referring to the one-off cost generated in the course of consumers transferring from one provider to another product or service provider. This cost includes not only economy expenses, but also time, energy and emotion, being an important factor of constituting barriers to enterpri... ...lly, the equilibrium is at point A (Q1, P1). With more rivalry and competition between suppliers, S1L shifts to the rights of S2L. The equilibrium point moves from point A to point B (Q2,P2) . As a result, loans price (interest rates) fall from Q1 to Q2 according to Graph 1. Profit is equal to total revenue of minus cost. While total revenue is equal to the price multiplied by the quantityï ¼Ë†price is decreaseï ¼â€°. It can be concluded that the Australian government to develop policies to protect the interests of local people through the intervention of good housing loan market. The Australian government's move to provide a variety of options for Australians, they can freely choose, while reducing the financial risks, the government provides loans to low-income persons through banks at below market rates, and they encourage healthy competition wwithin the home loan market.