BankWest has raised the rate on its standard variable loan products, foreshadowing further rate rises by major banks.

BankWest added 0.2 percentage points to its standard variable loan bringing the rate to 9.55%, citing the rising cost of wholesale funding.

"Like all banks we're facing the rising cost of funds," said BankWest spokeswoman Sally-Ann Parker.

Last week the Reserve Bank kept the cash rate steady at 7.25% for the fourth consecutive month, raising hopes that higher lending costs for consumers had peaked. Soon after St George upped its standard variable rate 0.2 percentage points to 9.67%.

Major Australian banks such as ANZ and NAB established their willingness to raise rates ahead of RBA moves earlier in the year when the costs of the global liquidity crisis became clear.

Consumer groups charged the banks were taking advantage of the credit crisis to increase profits eroded by the non-bank lenders in recent years.

In recent months, the global credit shortage has again begun to push up the banks' funding costs.

The price of 90-day bank bills has increased from an average of about 20 basis points above the cash rate before the credit crisis in August to about half a percentage point higher or more, according to data from Bloomberg.

TS Lim of Southern Cross Securities said BankWest's rate increase showed the bank is under "margin pressure", referring to the profitability of loans versus their costs.

He said that in the past BankWest had used high yields deposit products to win customers.

"It's only a matter of time before they needed to raise rates to recoup costs."

Mr Lim said BankWest's British parent, HBOS, was also trying to stabilise the direction in its Australian holding.

"At the end of the day what you want is a profitable business," Mr Lim said.

"The days of chasing market share are over. They must improve their margins."

Today's increase puts BankWest's standard variable mortgage rate .09 percentage points above the average of the big four Australian banks' corresponding rates.

The cost of doing business at BankWest and HBOS has become the source of speculation among analysts who think the British bank, hit by a slackening British mortgage market, could eventually spin off the Perth-based super-regional in order to raise needed capital.

czappone@fairfax.com.au

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