Two of Australia's major banks, Westpac Banking Corporation and the National Australia Bank (NAB) are seen following its two competitors in implementing higher interest rates after government authorities tighten up on exit fees.

NAB and Westpac will likely slap higher rates to soften the impact of Australian Securities & Investments Commission's decision to implement a new fee reform package that would prevent banks from charging customers twice if they decide to pull out their loans.

Currently, the major banks charge establishment fees of about $600 on a new mortgage, while exit fees range from $700 to $900 at ANZ, Commonwealth Bank of Australia, Westpac and NAB.

ANZ Bank was the first to lift their exit charges, but lifted their variable rates by 39 basis points 7.8 percent and maintained no exit fees for clients.

Prime Minister Julia Gillard was quite disappointed with the ANZ and CBA. She said in an interview from South Korea: "I believe Australians are angry enough that they will be looking again at the conduct of their own bank and judging what they should do next based on that conduct," she said.

"There is no excuse for the sorts of interest rate movements we've now seen from the Commonwealth Bank and the ANZ Bank."

ASIC's decision

ASIC chairman Mr. Tony D'Aloisio said in a report by the Wall Street Journal, the regulator would go after banks that consistently charged customers "unfair" fees when exiting mortgages in the first four years.

Mr. D'Aloisio said in the same report that customers should be paying smaller exit fees the longer the customer has had the loan.

Australia's third largest bank in terms of market capitalization and mortgage loans issued in the country made the crucial decision late Wednesday although it know it will drew the ire of government authorities and the public at large.

The decision, which followed the Commonwealth Bank's 45 basis-point rise to 7.81 percent last week, was seen to cover for the earnings that may be affected by lower exit fee charges.

The said fee restrictions increase the likelihood that NAB and Westpac will follow ANZ and CBA by raising lending rates by more than the Reserve Bank's 25 basis-point official rate adjustment.

The Australian Securities & Investments Commission revealed yesterday its new fee reform package would stop banks from "double dipping" with charges on customers. It said banks that charged customers establishment fees would not be able to levy exit fees.