It's no surprise that the Federal Reserve put up US interest rates by 25 basis points, but what may catch some Australians off guard is the flow-on effect here.

It's only the third US rate increase since the height of the global financial crisis, but this one has come just three months after the previous hike and sooner than markets expected at the beginning of the year.

Australian borrowers won't escape unscathed. They should be prepared for the fallout of higher interest rates here too.

The US ten-year bond rate serves as the platform for global interest rates and is a rough indicator of bank funding costs.

Australian banks get around 40 per cent of their funding from overseas, so they will have more than enough excuses to hit borrowers with another round of rate increases.

Ten-year US bond yields have risen steeply, especially after Donald Trump's election in November. ( Supplied: Reuters )

Banking analyst Martin North from Digital Finance Analytics has no doubt there'll be knock on effects.

He said lenders will point to higher funding costs as an excuse to raise mortgage rates and they'll have the blessing of the Reserve Bank.

The RBA has been more vocal about rising house prices, calling on the banking regulator to step up efforts to curb riskier lending.

Banks have increased variable home mortgage rates 25 to 30 basis points since they bottomed less than a year ago. That means someone paying a rate of 4.25 per cent could now expect to be paying at least 4.5 per cent.

Investors have been hit harder, with hikes of between 40 and 60 basis points.

Both groups are likely to be in the firing line this time around, although investors face bigger rate risks over the next few years.

More rate rises ahead as Fed fights Trump

It's only the beginning of the end of ultra cheap money.

The Fed is increasingly confident that US growth is quickening and sustainable. Unemployment is falling, wage growth is almost 3 per cent (around 50 per cent higher than Australia), inflation is picking up and consumers are more confident.

"We expect the US economy to grow about 2 per cent this year, which is good by historical standards," forecast National Australia Bank's chief economist Alan Oster.

"We'll probably get two more rate rises this year."

Confirmation that the world's biggest economy is gathering pace is good news for exporting nations like Australia.

Mr Oster added that "it may mean commodity prices will stay higher than first thought".

Despite the encouraging trend, there's an underlying note of caution.

With unemployment falling, inflation picking up and wages growth running at a healthy clip, the US Federal Reserve regards the current growth rate as adequate, but the Trump administration has plans for much faster 4 per cent growth boosted by tax cuts and infrastructure spending.

So America's central bank and its President look like they're at odds, which risks damaging confidence and driving interest rates more aggressively higher.

Another risk which could derail the improving prospects is Donald Trump's protectionist trade policy, which could trigger a trade war with China.

A US recovery is good news for the global economy, but Mr Oster is warning against being overly optimistic.

"We have lifted our global growth forecast to 3.25 per cent, whereas the long run average is 3.8 per cent, so I don't think you should be assuming the world's off and running like before the GFC," he said.

"The world's OK but it's not necessarily shooting the lights out."