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The first increases in the cost of standard variable mortgages since June are expected to come as early as today although they will be pegged at 0.25 per cent and in line with the Reserve Bank's sanctioned rise in official cash rates.

With the big four banks engaged in a Mexican stand-off yesterday as to who would be the first to break ranks, pressure was mounting on the current mortgage rate setters, the Commonwealth and National Australia Bank, to take a lead on the issue.

The two have the lowest variable home loan rates of the majors with both of them sitting at 5.74 per cent. A 25 basis points increase would take them to a sliver below 6 per cent.

But neither appeared in a hurry yesterday to cop the criticism of putting rates up despite the fact that the Treasurer, Wayne Swan, and RBA governor, Glenn Stevens, both accepted on Tuesday that home loans would rise in response.

All of the majors were still reviewing their rates yesterday but the indications were that as soon as one goes, the rest will follow very quickly.

The Commonwealth Bank, in particular, was mulling over the exact timing and hoping to respond for once to a move by one of its rivals after the howls of protest that followed the 10 basis points (0.1 percentage points) increase it imposed on its main rate four months ago.

While that rise kept it below Westpac and ANZ and put it on a par with NAB, the bank – which was looking to recover part of its own high cost of borrowing – was accused of putting the nascent recovery and the-then fragile housing market at risk.

But the recent strength of the upswing and declarations by world and domestic economic institutions that the worst of the crisis is over has largely mitigated that argument and the banks will use the cover of the RBA's decision to follow suit.

Nonetheless, the current political environment means that their variable mortgages will only move by the same amount as the RBA, even if the banks' costs of longer term financing – which funds much of their mortgage book – remains high.

These are about 50 basis points more than what the industry is recovering from home loan borrowers and all of the major banks have indicated privately that they will look to recoup that difference once the economy is on the mend.

However, industry sources suggested yesterday that such a move will not happen this time around or even at the next RBA-sanctioned increase as the banks need consumers to maintain their confidence to borrow.

In the meantime, the big lenders are also aware that even though they have an almost total grip on the market for new mortgages they are still having to offer discounts of as much as 0.7 per cent to compete with credit unions and building societies whose deposit bases provide cheaper sources of funding.

On the way up

Standard variable home loan rates (%) 

	Current rate	Expected new rate
Commonwealth	5.74	5.99
NAB	5.74	5.99
ANZ	5.81	6.06
Westpac	5.81	6.06
St George*	5.79	6.04
BankWest	+ 5.10	5.25