More than 20 lenders have hiked their home loan rates in response to growing funding pressures, giving borrowers a wake-up call as they wasted the opportunity to make extra payments on their home loans. The result of a significant rate rise could be a huge shock to both owner-occupiers and investors.

"Sensible investors should be paying down debt and building up equity as market uncertainty grows," said Andrew Peters, principal of Semaphore Private.

Some of the lenders that have already increased their home loan rates include Macquarie Bank, Mortgage House, and the Bank of Queensland.

Property markets are already under stress with low lending momentum, rising delinquencies, and lenders pushing up prices. It could lead to a housing crash if incomes remain static and unemployment stays at current levels.

Households are also highly sensitive to rate increases as household debt continue to rise. However, the majority of debt is being held by wealthier households with a capacity to repay. Lending standards have also risen and the average mortgage is two years overpaid, hence giving many households a buffer against sudden rate increases.

But in spite of the continual growth of the economy, Martin North of Digital Finance Analytics believes that major stress is building in the banking system.

"Affordability is under more stress, thanks to tighter underwriting criteria. Property buyers have squandered a once-in-a-lifetime opportunity to reduce debt," he said. "Many have simply ridden the payments down and used the spare cash for other purposes. In other words, there is a cadre of loans out there written in the past two years that are outside current bounds."

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