Indeed, since late last year the bank bill swap rate, or BBSW, has jumped 0.25 percentage points after showing a sharp acceleration in February. You may have heard about the BBSW for a couple of reasons. First off, it's the one the banks have been rigging to their own advantage for a number of years.

The other notable thing about the BBSW is that it is the reference point used to set interest rates on most business loans, and also flows through to personal lending rates.

That means that over the past few months Aussie companies with exposure to variable-rate loans have just received the equivalent of a rate hike, ANZ rates strategist Martin Whetton says.

As we see from Suncorp, the relationship is not one-to-one when it comes to personal lending. That's because the large bulk of bank funding is long-term in nature. Plus, banks always have the choice to swallow the hit to their margins – particularly if they are in the middle of a reputation-tarnishing royal commission and would prefer to avoid the negative PR.

Crucially, the lift in BBSW "has nothing to do with the RBA cash rate", which is expected to remain steady for at least the next six months, Whetton notes. It has "almost nothing to do with what the Fed's doing", he adds. Instead, the "unintended consequences" of US policies which have worked to push short-end rates higher (and prices lower).

These include the incentives given to big American tech names to repatriate their enormous offshore cash piles, as well as the big lift in supply from US Treasury to fund President Trump's spending program just as the Fed is demanding fewer securities as it runs down its holdings.


These developments have flowed through to the local market as these tech companies, which were in effect acting as bond investors, have stopped buying corporate debt, including Australian bank paper.

That all sounds confusing, and it is. And there have been other factors as well. But the key takeaway is that funding costs in Australia are going up at a time when the RBA is stuck in neutral. It highlights how what happens with rates and in money markets overseas, and particularly in the US, can have repercussions here – repercussions that many are possibly unprepared for.

The scale of this was brought home in a conversation I had this week with Lazard Asset Management's professorial portfolio manager, Philipp Hofflin.

Hofflin has a keen interest in the risks posed by the massive level of household indebtedness in this country. He is at pains to say that he is not suggesting an imminent property collapse, but that any investor really ought to be aware of how sensitive Aussies are to interest rate risk.

Some stats: in the US before the GFC around 36 per cent of the net wealth of Americans was tied up in their homes. After the crisis, which hit house prices hard across the country, that percentage dropped to 28 per cent and the economy slumped into recession. In contrast, on average today 70 per cent of Australians' net wealth is in housing. If you exclude the wealthiest 20 per cent and poorest 20 per cent, "middle Australia" has 90 per cent of their net wealth in residential property.

The cost of borrowing matters because debt has been the thing that has pushed Aussie property prices up and up. A massive surge in credit from the early 2000s is the thing that has dislocated prices from incomes so incredibly. Hofflin points out that it wasn't just a rates story – you needed borrowers willing to hock themselves to the hilt, and banks who were willing to lend.

The RBA may be on hold, but Australian companies have already suffered the equivalent of a rate hike on their variable rate borrowing rates. Could households be next? Supplied

Higher rates from here can be part of the story that eventually leads to the great unwinding of Australian household debt. Whether it happens quickly or slowly seems to be the only question. So far most of us believe it will be the latter. The big lift in bank funding costs in recent weeks is a warning that it could be the former.

It's no surprise that news Suncorp was lifting its key mortgage rate by 0.05 percentage points failed to cause much of a stir. Glenn Hunt