Bank customers are still being told to "vote with their feet" if they're unable to cope with higher interest rates.
All four major banks have lifted their standard variable home loan fees without any prompting from the Reserve Bank.
But Treasurer Wayne Swan has told Channel 10 that customers still have the upper hand.
"While there might be a familiar or similar figure across the banks in terms of a standard variable rate, there are plenty of discounts around.
"So there is plenty of variety out there if people have the capacity to vote with their feet."
Commonwealth Bank chief Ralph Norris also warned last week that further hikes to mortgage rates were likely because of the global credit crunch.
Mr Swan said the increases were a decision for the banks but the government was taking action to encourage competition.
An example is the government's bank-switching package that will allow unhappy borrowers to switch banks in search of a better deal, he said.
"There is a balance that they (banks) have to find between the needs of their shareholders on the one hand and customers who have been hit for six by a large number of rate rises in recent times and the banks ought to take those decisions very carefully," Mr Swan told the Ten Network.
"The government does have an eagle eye on competition in the banking sector.
"It is very important that we put them under competitive pressure and part of that competitive pressure that needs to be there is a fair dinkum bank switching package.