National Australia Bank and the Commonwealth Bank have followed the lead of ANZ and Westpac, hiking interest rates above that prescribed by Australia's central bank and blaming higher funding costs for making margins unsustainable.
NAB was the last of the big four to increase its rates this afternoon, rasing its variable mortgage rate by 9 basis points to 7.31 per cent.
Earlier today, CBA and Bendigo and Adelaide bank also announced their intentions to raise rates.
Bendigo and Adelaide Bank lifted its interest rate by 15 basis points, while CBA hiked its standard variable rate by 10 basis points.
The moves follow standard variable rate increases from ANZ and Westpac on Friday, and a decision by the Reserve Bank of Australia one week ago to leave the cash rate on hold.
"This is not a popular move, we know that, but it is the right thing to do to restore a proper balance between depositors, borrowers, the bank's shareholders and our community partners," managing director Mike Hirst said in a statement.
"At current funding cost levels, that balance is out."
Funding costs have increased in the last six months, and the bank's internal modelling suggests it is not making money on new mortgages being written, he said.
"Banks are currently subsidising mortgages and if you look at the traditional role of a bank, this makes no sense and is unsustainable," Mr Hirst said.
He also said many staff at Bendigo have taken unpaid leave to help reduce costs, while no new back office staff are being hired.
CBA pointed to the Reserve Bank's February statement on monetary policy which said bank funding costs have increased relative to the cash rate over the past six months.
Further increases in the spreads of term deposits, prices demanded by global bond investors in banks, and the costs of foreign exchange hedging were likely to be exacerbated given the increased uncertainty driven by Europe's debt crisis, CBA said.
The RBA's cash rate is only one factor driving the bank's total funding costs, and CBA believes local banks should continue to price their products sensibly, CBA's group executive of retail banking services Ross McEwan said.
"We need to balance the needs of all of our customers by providing competitive pricing across all products," he said.
"Whilst we understand that any increase in interest rates is not favourable to borrowers, our millions of deposit customers are favoured and since the commencement of the GFC (global financial crisis) we have seen significant competition in retail deposits pricing."
The needs of shareholders must also be balanced with those of other stakeholders, he said.
About 800,000 Australians own CBA shares, and millions more hold them through their superannuation funds, with both direct and indirect shareholders relying on CBA's returns, he added.
CBA's shares spiked 41 cents, or 0.82 per cent, to $50.29.
