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CANBERRA, Feb 21 AAP

February 21 2013, 1:06PM

Independent interest rate cuts by three small lenders are a sign that the federal government's banking competition reforms are working, Treasurer Wayne Swan says.

Financial comparison website, RateCity, says Holiday Coast Credit Union cut several of its loan products by 20 basis points, BMC Mortgage reduced several loans by 10 basis points, while IMB trimmed one of its loans by five basis points.

"While there have been several rate increases out-of-cycle, we've never seen lenders drop variable home loan rates while the cash rate remains stable," RateCity spokesperson Michelle Hutchison said in a statement on Thursday.

A spokesman for Mr Swan said since the government announced its package of banking reforms to boost competition, smaller banks had captured an estimated $21 billion in home lending business from the big banks.

"We've made it easier for consumers to walk down the road and get a better deal if their bank doesn't do the right thing by them," the spokesman told AAP.

Ms Hutchison believes other lenders have room to move after keeping on average 42 basis points of the RBA's 175 basis points worth of cuts in the cash rate since November 2011 from variable home loan borrowers.

"If these three lenders can afford to cut variable rates out-of-cycle, other lenders - including the major banks - have no excuse to sit on their hands," she said.

She said a 20 basis point cut on an average $300,000 home loan from 5.9 per cent to 5.7 per cent could mean a saving of $456 per year, or $13,680 over the life of a 30-year loan.