Banks are going to raise interest rates higher, out of cycle with the Reserve Bank of Australia (RBA), according to a new report by Deloitte.

A gathering of Australian financial lenders were surveyed for the report, with a number expressing their concern over the pressures being brought to bear on the banks, including regulatory controls and higher funding costs.

While it would be normal for industry lenders to express concerns about factors that negatively impact their businesses, lenders were concerned that higher capital requirements would negatively impact on the mortgage market – coinciding with a slowdown in house prices.

Deloitte financial services partner Graham Mott says, “Given those pressures, you’ve got to believe that out-of-cycle rate increases are not yet behind us.

Macquarie Group Ltd’s (ASX: MQG) Frank Ganis echoed those views, “We would expect the repricing cycle for mortgages, that started some six months ago across the industry, will continue.

In mid-2015, Australia’s big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) began raising interest rates on investor loans, as well as lowering the loan-to-valuation ratios (LVRs) and limits on how much they would lend to investors.

Then in October, the banks raised interest rates on all their home loans. Bank of Queensland Limited (ASX: BOQ) then raised interest rates for owner-occupiers by 0.12% and for investors by 0.25% earlier this month.

If we also consider that bad debts are rising, banks will surely be forced to raise mortgage rates again, no matter what the RBA does.

Foolish takeaway

The lack of credible competition and the pain of switching in Australia’s mortgage market means most Australians are unlikely to switch to a new lender offering lower rates. But higher interest rates could also see our housing market come off the boil more rapidly than many market commentators are expecting.

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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.