The Real Estate Institute of Australia (REIA) is supporting bank reform moves saying that the market concentration trend is affecting small businesses and home buyers.

Australia's banking sector is currently under scrutiny, with many criticizing that the four major banks have cornered the market for home borrowers and businesses. REIA said in its submission to the Senate inquiry that credit unions and building societies must be treated as part of the banking system.

"REIA believes that ways of improving competition in the financial sector need to be vigorously assessed including the possibility of a new pillar in the banking system based on the mutual sector - credit unions and building societies," the group said in its submission.

REIA cited that weekly family income to pay for loans jumped from 25.5 percent in March 2000 to 34.6 percent by June 2010 because of rising interest rates. This has led to housing being increasingly less affordable for potential buyers. The group said, "With a direct link between interest rates and housing affordability, it is important that any changes in retail interest rates are justifiable and are kept to a level that can be accounted for by changes in the banks' borrowing costs."

The group also called attention to financing for small businesses saying that banks have blocked access to credit, applied unfair risk assessments and made credit cards expensive. "REIA believes that measures to stop the penalizing of small business finance costs need to be put in place," it said.