Swan renews call for home loan competition

Treasurer Wayne Swan believes the major banks should be working for both their shareholders and their customers, while providing "red-hot" competition in the home loan market.

Home owners are waiting to see if the nation's largest mortgage provider, Commonwealth Bank of Australia, and the National Australia Bank follow the lead of the ANZ Banking Group and Westpac by raising lending rates independently of the central bank.

The Reserve Bank of Australia (RBA) bank left the official cash rate unchanged at its monthly board meeting last week.

Asked on ABC Brisbane radio on Monday whether a bank's first responsibility lay with shareholders or their customers, Mr Swan said, "It's a mix of things."

He said the big four banks were "very, very profitable", with return on equity rates amongst the highest in the world and net interest margins at the levels they were before the global financial crisis.

"They are doing pretty well at the moment, but what we need to see is some red-hot competition out there," he said.

"I think the big banks rely on that many people say, 'It's all a bit too difficult, we'll leave it the way it is.'"

Independent senator Nick Xenophon said the government should consider more of the recommendations made by a Senate inquiry in 2011, including amendments to mortgage insurance regulation that would make it easier for borrowers to switch banks.

"It (mortgage insurance) is a huge impediment, a huge barrier, in switching banks," he told reporters.

Labor backbencher Doug Cameron said the government would need to look at more measures to increase competition in the banking sector.

"We have made it easier for people to move from bank to bank, maybe we need to make even easier," Senator Cameron told reporters.

Mr Swan said while the government had put an end to exit fees on new mortgages, he agreed that mortgage insurance was a problem when trying to change home loans as it was non-transferable.

But he said the government was developing a fact sheet so potential borrowers could get an explanation of the rebates they would get if they cancelled their insurance and what the alternatives were for a new policy.

Opposition treasury spokesman Joe Hockey said the treasurer was sending mixed messages and pretending people had a choice.

"On the one hand he's trying to say (the big four banks) have huge profits and their net interest margins are no greater than they were during the global financial crisis," he said.

"On the other hand he's saying you've got to shop around."

Cabinet minister Anthony Albanese said banks needed to show more of a social conscience, given their huge profits.

"They are not just rogue businesses," he told Sky News.

Parliamentary secretary to the treasurer David Bradbury said it was important for the economy to have strong profitable banks.

"But at a time when most industries would cut off their right arm to have the sorts of profits our banks do, it's a bit rich ... to have banks jacking up interest rates," he said.

Nationals senator John Williams questioned whether the RBA had lost control of monetary policy.

"If in the next month or two the Reserve Bank does reduce interest rates, will the banks lower those rates?" he asked.