Questioning what is considered to be unfair bank exit fees does not address the real problem according to the Nationals Senator for New South Wales John Williams.

Senator Williams said from the 1^st of July consumers will be able to challenge what they feel are unfair exit fees on variable loans, but in his opinion they should be banned altogether because they  stifle competition.

He said borrowers are often forced into a corner because it is too expensive to get out of a loan to go searching for a better deal.

"In December last year when the Reserve Bank increased its cash rate by .25 percent, my home loan rate with a leading bank went up .44 percent.

People were obviously irate, but had to weigh up whether they were better off paying a substantial financial penalty to break the contract and go looking for a fairer deal at another bank, or wear the higher increase.

"It is all well and good for Treasurer Wayne Swan to take the moral high ground and advise people to look for a better deal at another bank every time rates go up. He doesn't mention the exit fee they will have to pay, which shows how much out of touch he is with the average Australian's day to day financial predicament.

But his Government refuses to legislate to back up his rhetoric.

Labor's new laws from July means it will be up to a third party to determine if an exit fee is "unfair" or "unconscionable".

In other words it is a subjective assessment and whatever the ruling consumers will feel they have received a rough deal.

I have told ASIC and Assistant Treasurer Senator Nick Sherry previously that for proper competition establishment fees and exit fees on variable loans should be totally banned", Senator Williams said.