I. Introduction The Australian property sector has long been characterized by relatively high homeownership rates and a predominance of adjustable rate mortgages (Luci, Lawson & Roberts, 2003, Pg.1). This is why taking out a home loan is one of the most common practices in Australia and many banks and lenders are involved in the market. There are many factors in considering a home loan, namely the transfer cost, and the most substantial of these transfer costs is the exit fee. This essay will further explore the definition and identification of switching costs in the Australian home loan market, explain how such switching costs could increase the power of providers in the market and hypothesize the expected effect on the price charged by providers and on profits they subsequently received. . II. Switching costs in the Australian home loan market Switching costs are costs induced by economic agents when they change their suppliers; these costs originate from a series of reasons, economic and psychological (Kim, Kliger, Vale 2013, p.25). There are generally three sources of switching costs in the Australian home mortgage markets. This essay will consider a home loan example provided by Martin in his article in The Age. The first is the exit tax. Exit fees are fees that may be charged if you pay off your home loan in full, within a specified period, usually the first 5 years (MoneySmart, 2013). In 2010, the Australian Government gave ASIC the authority to regulate exit fees. In our case, if one were to exit a $300,000 loan payable within 25 years in the first three years, the exit fee that would be incurred would be $5178. This significant amount of exit fees creates a high switching cost for borrowers. Australians taking home loans, through which banks and lenders can use to gain greater market power. . The second is the cost of research; after getting a loan from a supplier, it would take time and energy