The Big Four banks have started warning the public and the government that not only are they unlikely to pass on the forecast Reserve Bank interest rate cut from 3% to 2% over the next few months, but there is the possibility they will actually increase mortgage interest rates. ANZ has just announced a 25% drop in half-year profits and National Bank has announced a 10% drop. Over the same period both banks increased the interest spread on home loans i.e. they increased the net margin over what funds cost them to borrow to what they lent out in home loans. They need that to get the profits back in line, they claim.