“The refinance boom has put Australian banks on notice: shape up or customers will jump ship. Borrowers who haven’t yet refinanced should use this competition in the market to get themselves a better deal.”

As the refinancing boom continues, the banks have been scrambling to compete by offering discounts and cashbacks to lure clients from rivals, while trying to hang onto their existing borrowers.

However, Morningstar head of equities research Peter Warnes warned on Friday that significant increases in the wholesale cost of funding could lead to the banks raising mortgage rates outside the official rate increases.

Warnes said $370 billion in fixed rate mortgages had started to roll off and the refinancing process would continue to accelerate into next year.

“Most refinancing will see repayments increase significantly, absorbing over 40 per cent of household disposable income. That will alter household consumption patterns meaningfully,” he said.

UBS analysts expect $500 billion of fixed-rate mortgages to roll off before December 2024, and believe expect it will impact consumer cash flow next year.

In research published on Friday, the analysts said rising interest rates were supportive of top-line revenue growth for the big banks, but there were concerns around slowing credit growth and higher bad debts.

The major banks have benefitted from the rising rate environment over the past six months, increasing their net interest margins, a key driver of profitability which compares banks’ funding costs with what they charge for loans.

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The Australian Competition and Consumer Commission has been tasked by Treasurer Jim Chalmers to examine the rates offered to savers by the banks compared with the rate rises they’ve passed onto mortgage holders.

While the banks have passed on all the RBA’s rate rises to mortgage holders since the central bank started tightening monetary policy, the increase in deposit rates has been more limited and patchy, a dynamic that is boosting bank profits while attracting growing scrutiny from politicians and regulators.

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