Australia's four big banks have long been suspected of colluding with each other, but now it appears they are at war.

National Australia Bank fired a shot over the weekend, announcing it would pay some of the exit fees of other banks' customers if they switched.

Westpac has responded with a plan to cut some of its fees.

Executives at ANZ, Commonwealth Bank and Westpac opened this morning's papers to find they had been dumped.

NAB published a break-up letter to its three main rivals that appeared to concede they do have a history of collusion.

"This is a really difficult letter for me to write. I think we all know that this has been coming. For a long time now my friends have all been telling me that I could do a lot better for myself. But they don't like how I act when I'm around you," the letter from NAB said.

The NAB's break-up note is headlined: "It's over between us."

The advertisement is part of NAB's marketing strategy to differentiate itself from the other big three.

It follows NAB's announcement over the weekend that it will pay $700 of the exit fees of home loan customers coming over to it from Westpac and the Commonwealth.

Westpac has fired back with plans to cut a number of application fees for some new home loan customers.

That is good for customers, but some investors are worried it is the start of a price war that could lead to lower profits.

Westpac chief executive Gail Kelly told a briefing for the company's results today that it is a sign of good competition.

"I think what we're seeing is signs of excellent competitive intensity in the mortgage market," she said.

"And I think you'd expect that in a low-growth environment, you'd expect that kind of intensity and we welcome competition and we think it's very healthy overall."

Hidden fees

NAB widely publicises that its standard variable mortgage rate is the lowest of the big four and also that it has taken the lead in cutting a range of fees.

But it has been revealed that not all its exit fees are gone.

The Financial Review has found NAB is still charging exit fees on accounts at its Homeside division, which caters to customers who are brought in by mortgage brokers.

That is despite the bank saying it believes customers should have the freedom to walk down the road and find a better deal without being charged an exit fee.

Lisa Gray, group executive of NAB's personal banking division, says Homeside customers already get a strong offer from the bank.

"It's a very competitive product, a very good standard variable rate," she said.

"It's a different experience for customers and so hence why we manage those customers differently. The products themselves are different as well."

But on exit fees it would seem ANZ is the leader.

Meanwhile, Westpac has announced a 3 per cent fall in first-quarter cash earnings to $1.55 billion.

It says earnings are down because the result in the first quarter of last year was boosted by high Treasury and markets income.

The Reserve Bank has given another strong indication that official interest rates could be on hold for several months.

In the minutes from its most recent meeting, the RBA said benign inflation and subdued consumer spending had bought it extra time to gauge the strength of the economy.

The cash rate is steady at 4.75 per cent after the Reserve Bank announced a fortnight ago that the current setting was mildly restrictive and appropriate.