April 3 (Reuters) - Australian shares were flat on Monday as gains in financials slightly outweighed the losses in the basic material sector, which slipped on falling iron ore and copper prices.
The S&P/ASX 200 index rose 0.1 percent, or 3.4 points to 5,868.8 at 0145 GMT.
Financial stocks gained with three of the 'Big Four' banks rising between 0.06 percent and 0.4 percent. Westpac Banking Corp however lost 0.03 percent.
"Financials have had a good run, driving the market, but today they are flat. So, people don't really know what to make of the financial sector in Australia at the moment," said Chris Weston, an institutional dealer at IG Markets.
Banks are focusing on their loan books and investor lending, and are looking at leverage in the property market, Weston said.
"Also, they are raising rates independently and that is really helping their margins as well."
The Australian Securities and Investments Commission on Monday said it was launching a new round of industry surveillance to ensure banks and brokers were not recommending overly expensive interest-only loans to customers.
This comes after the banking watchdog, Australian Prudential Regulation Authority, said it would tighten rules on interest-only loans.
Meanwhile, home prices in Australia's major cities jumped again in March to propel annual growth to the fastest in almost seven years.
Among commodity stocks, miners Rio Tinto and Fortescue Metals lost 0.9 percent and 1.3 percent respectively, while BHP Billiton, which has significant oil interests, shed 0.7 percent.
Chinese iron ore futures had fallen 3 percent on Friday, and copper fell more than 1 percent on Friday as the end of a strike at Peru's biggest copper mine dampened fears of reduced supply.
Oil futures also dipped in early Asian trade on Monday on worries about global oversupply after a higher U.S. rig count pointed to rising U.S. shale production, while a stronger dollar also put pressure on crude.
Energy stocks were lower with Worley Parsons losing 2 percent, while Woodside Petroleum lost 0.3 percent.
New Zealand's benchmark S&P/NZX 50 index 0.2 percent, or 16.39 points, higher at 7,213.17 extending gains into its fifth straight session. Trade was delayed at the open by a technical problem.
A2 Milk Company and Argosy Property led the gains, rising more than 2 percent each, with A2 Milk rising to an all-time high of NZ$3.09.
For more individual stocks activity click on (Reporting by Susan Mathew in Bengaluru; additional reporting by Sandhya Sampath; Editing by Eric Meijer)