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It would now appear to be a question of when - rather than if - the majors will raise rates above the Reserve Bank rate.
For months Australia's biggest banks have warned of the need to raise their interest rates above the RBA in a bid to offset higher funding costs.
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Late last month, Westpac's chief executive officer Gail Kelly reiterated that funding costs have risen "materially" since the onset of the GFC.
Moreover, Ms Kelly says it is likely that the costs of funds will continue to increase as banks replace offshore wholesale borrowings made before the GFC with more expensive funds.
With the days of cheap funding over, investors have priced in a much higher risk premium since the financial crisis, with long-term funding costs increasing approximately 120 basis points or about tenfold according to Westpac data.
Ms Kelly's comments echo CBA's chief executive Ralph Norris' warning that elevated global wholesale funding costs are currently placing upward pressure on interest rates.
Mr Norris says out of cycle rate rises by the big banks are now all but inevitable.
The last time the banks raised rates out of step with the RBA was in December 2009.
Westpac was the first to move, raising its standard variable home loan rate 20 basis points above the Reserve Bank's 25 basis point increase.
CBA and ANZ also raised above the cash rate while NAB remained in step with the RBA.
Loan Market Group's chief operating officer Dean Rushton said earlier in the year that it was no longer a matter of ‘if' banks would lift rates, but ‘when'.
And it seems now that both economists and brokers agree.
UBS analyst Chris Williams says the big four will more than likely use any rate hike by the Reserve Bank as the perfect opportunity to add "15 basis points of additional rises".
If this happens, mortgage rates in Australia would sit close to 8 per cent - almost matching pre global financial crisis levels.
Similarly, a recent The Adviser straw poll found almost 80 per cent of brokers believe the banks will move out of cycle with the RBA before year's end.
Of the 341 respondents, just 15.8 per cent thought the banks would toe the RBA's rate line - while the rest remained unconvinced.
But while brokers have braced themselves for out of cycle rate hikes, the federal government has not.
Treasurer Wayne Swan says higher funding costs are not squeezing banks' profit margins, and he believes there is no need for any out of cycle rate hikes.
In fact, Mr Swan has launched a pre-emptive attack on any extra increase by the banks, stressing that they have reported solid profits which do not warrant the need to charge borrowers more.
Mr Swan says banks are presently making healthy profits and their net interest margins are above what they were before the GFC in 2007.
Earlier this year the majors recorded a cumulative half yearly profit of $10.4 billion.
According to Mr Swan, Australia's big banks have shown little sign that they are under pressure and he believes the interest rates they charge have been enough to make up for the higher costs they pay for overseas funds.
