Independent analysts warn that nearly 1 million real estate owners will default in the next few months.
Even if the big four raised the standard floating rate by just 0.15 percentage points in the next few months, homeowners could default, explained Martin North, head of Digital Finance Analytics.
A number of Australian banks have started raising interest rates, according to Australia-Guangzhou News (ABC News).
North said it was almost certain to raise interest rates, but Aussie Home Loans Chief Executive James Symond worries that potential borrowers will be "locked out" and will not be able to get a home loan.
"I`m almost sure they will be forced to raise interest rates, which is only a matter of time," North said. "of course, when they raise interest rates, there will be a political reaction."
Banks such as Macquarie, AMP, Queensland, Suncorp and ME Bank, as well as financial institutions, will raise interest rates on homeowners` loans.
Experts are waiting to see if the big four banks (ASM, SWB, Federal Bank and National Bank) will also raise interest rates.
Unless there is some unexpected, rapid volatility in global financial markets, the change process, banks will all raise interest rates by September, North said.
But the North is cautious about rising interest rates because it could have a huge negative impact on Australian owners and lenders.
"there are now nine hundred and seventy five thousand households in Australia with homeowners mortgages on the brink of crisis," he said. "about 50, 000 are on the brink and they may default."
"it seems that all banks are facing the same problem, partly because they are facing upward pressure on interest rates in the pool of funds in these areas, both domestic and foreign," said Michael Blythe, chief economist at the Federal Bank.
If interest rates rise 0.1%, for example, a Sydney homeowner with a $750000 mortgage will have a 60-yuan increase in monthly payments.
Borrowers have little room for manoeuvre, North said, and they are most affected, even if interest rates move little.
Meanwhile, Aussie Home Loans Chief Executive James Symond told the Sydney Morning Frontier that if banks continue to tighten credit channels, more and more people will be shut out and unable to own homes.
The Symond played down the risk of raising interest rates in the market, but also said continued bank scrutiny of spending and tightening of credit would have a negative impact.
"I want everyone to take it very, very seriously because I see a significant tightening in the credit market," he said. If we see it tightening further, I don`t think you`ll get the result you want. You may see a large group of people who can`t afford to buy a house. Big banks are involved. "
Factors that prompted banks to tighten credit include prudential regulation, risks, ongoing investigations into the banking sector by the Royal Commission and "the current market tone," Symond said.
He also said the mortgage industry found itself in turmoil as the Royal Commission conducted an investigation into unknown factors in the commission-based pay model and falling house prices in Sydney and Melbourne.
The real sign of a change in credit will be how hard banks are trying to limit their mortgage lending.
