The big four are apparently determined to veer away from the Reserve Bank of Australia's (RBA) overnight cash rate policy. The Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) are expected to launch a review of their interest rate after Westpac and ANZ Bank hiked their rates on Friday.

The ANZ Bank interest rate increase of 0.06 per cent was expected since the bank announced in January that its rates would be independent of RBA policies. Westpac had hinted of following ANZ and announced on Friday evening that it increased variable rates by 0.1 per cent.

The new round of rate increases, despite the RBA retaining on Tuesday the overnight cash rate at 4.25 per cent could lead to an exodus of mortgages from the big four, Treasurer Wayne Swan warned on Monday.

"Just as many angry Westpac and ANZ customers would have been looking very closely over the weekend at other lenders' rates, so too should any bank that follows suit," The Sydney Morning Herald quoted Mr Swan.

What would add to borrowers' anger at the big four is that these lenders collectively made $25 billion profit in 2011 and are expected to report healthy profits this week. CBA is expected to report on Wednesday a 4.9 per cent increase of first half profit of $3.49 billion, while Westpac is expected to announce on Thursday a first quarter profit of $1.55 billion. On Friday, ANZ will disclose its first quarter profit of $1.45 billion.

With the Westpac rate increase, it is now 0.24 points higher than NAB which is just 0.01 point shy of the last RBA rate cut. That means Westpac borrowers with a $300,000 mortgage would pay $48 more on their monthly amortisation than NAB borrowers with the same level of mortgage.

However, the relatively large difference may not last for long because NAB is not ruling out hiking its own rates.

An analyst forecast that CBA and NAB would hike standard variable mortgage rate by a margin similar to Westpac and ANZ, which could barely cover the cost of capital. ANZ Chief Executive is also insisting that the lender's 0.06 point hike was not sufficient to cover cost.

ANZ's 0.06 rate increase would not lead to a huge recovery since it could just add $68 million to the lender's bottom line, wrote John Durie of The Australian.

"Everything is relative and to most of us $68 million is not small change and neither is an extra $13 a month when we are already paying more for lighting rates and every other household bill," Mr Durie said.

While Mr Swan is critical of the big four's decision to hike interest rates, some key government officials including Australian Prime Minister Julia Gillard continue to leave their business with the big four. News.com.au reported that Ms Gillard and 11 ministers are still doing business with these banks. Ms Gillard has mortgages with Westpac for her Altona home and a Canberra investment property.

"Every Australian with a mortgage needs to make a decision that's in their best interest, as people have different factors to consider when selecting a loan that's right for them," News.com.au quote a spokeswoman for Ms Gillard.

Finance Minister Penny Wong and Financial Services Minister Bill Shorten have mortgages with ANZ, while Opposition Leader Tony Abbott used to have a loan with CBA but moved it to Adelaide Bank in 2010. All except one of the opposition shadow ministers also have mortgages with the big four.

AMP chief economist Shayne Oliver explained the reluctance of Australians to move their mortgages, despite the removal of exit fees, to resistance to change.

"It probably is worth shopping around, but experience shows people tend to stay with the big four banks.... The increases from the higher rates aren't huge, but for people already facing lots of other costs, it's just another pressure on household budgets," Mr Oliver explained.

Shadow treasurer Joe Hockey accused Mr Swan of sending mixed signals because until a few days prior to the Feb 7 announcement, the RBA was hinting of a rate cut, but instead kept the overnight cash rate. However, Parliamentary Secretary to the treasurer countered that Mr Hockey should not be critical of Mr Swan because he opposed the lifting of mortgage exit fees.

Independent Senator Nick Xenophon pushed for further amendment to regulations to make it easier for borrowers to change banks.

"The best thing we can do in terms to deal with the banks is to have an open competitive market to ensure new entrants are encouraged to enter the market right now.... The big four have too much power," Mr Xenophon said.

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