Home loan borrowers face the threat mortgage rates will rise by even more than official increases this year, as funding costs soar and banks repay $188 billion of emergency money borrowed from the Reserve Bank of Australia during the pandemic.

Smaller non-bank lenders have already increased variable mortgage rates more than the central bank’s 3 percentage points of rate rises since last May – passing on up to 20 per cent more each month – while some, including Nano Home Loans and Volt Bank, have been forced to stop writing new loans or close altogether.