While the focus as to why consumers have been unable to refinance to a better deal has been on exit fees, the real problem for homeowners wanting to switch lenders is the double payment of lenders mortgage insurance.

Why lender’s mortgage insurance isn’t portable is a mystery to me. You can transfer your home and contents insurance onto another property when you sell up and you can transfer your home loan to another home if for example, you want to trade up; but for some reason it isn’t possible to transfer your mortgage insurance if you switch lenders.

Lender’s mortgage insurance (LMI) protects the lender in the event that you default on your loan and the balance of your loan is greater than what they receive from selling the property.

Typically it applies if you borrow over 80 percent of the purchase price but can, depending on the property and borrower, be as low as 70 percent.

Premiums can be up to 2 percent of the loan amount.

Here’s the problem, if have borrowed over 80 percent of the purchase price, your LMI premium on a $300,000 loan could be as high as $6000.

Refinance your loan and not only is their no refund on the premium, regardless of how soon you refinance, you will have to pay it again if you’re loan is over 80 percent of the value of your home.

Given there are only two players in the market that underwrite mortgage insurance you’d think it would be portable.

Sure the contact of insurance is between the lender and the mortgage insurer but if the borrowers risk profile and property in question remains the same then LMI should be portable.

A nominal LMI transfer fee to help pay for the switch in lenders would be fairer then a double payment in LMI fees.

And finally a consumer should expect a pro-rata rebate if they repaid their loan early, especially if it’s within the first five years.

If the government were serious about creating greater competition in the home loan arena it should take a closer look at the mortgage insurance market.

Credit cards linked to home loans

Despite two consecutive rate cuts last year and the RBA holding the cash rate this month we haven’t seen much rate relief for credit cards.

To be fair credit cards are a revolving unsecured debt so they need to be priced higher but why as much as 12 - to 14% above the cost of funds when the default rate on credit cards is only around 2%?

Given most homeowners take out a package home loan that generally comes with a credit card, why not secure the card with the mortgage and charge the same rate? That would solve the unsecured credit risk.

Currently only two institutions offer such a product: Circle Credit Co-op and Service One Members Banks.

Credit card issuers put the cost of cards down to a number of things, including the cost of the interest-free period, the cost of fraud and the cost of reward schemes.

I put the cost down to just two – marketing and profitability.

The message here is simple. If you don’t pay off your card during the interest-free period, steer clear of reward cards. Grab a vanilla-style credit card or, better still, swap your credit card for a debit card.