As controversy erupts in Australia over mortgage rate rises, the prospect of local banks following suit and lifting their rates depends on New Zealanders' appetite to borrow and funding pressures from Europe.

Westpac and ANZ both announced on Friday they were putting up floating mortgage rates across the Tasman, despite no shift in the official cash rate.

In Australia ANZ attributed the move - which has sparked public ire including a rebuke from Finance Minister Wayne Swan - to higher funding costs caused by Europe's fiscal crisis.

New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said there was a risk the same thing could happen here if the appetite for borrowing increased.


"If funding pressures remain then we will eventually feel them but that will be in the context of whether or not us as Kiwis want to borrow more money," he said.

"Interest rates are relatively low ... part of that is maybe [because] we don't have much lending growth.

"Banks have to borrow money to lend on to someone else or they can have it from deposits. Right now they're getting a lot of money from deposits, so they don't have to borrow as much money from offshore so they're not seeing that big increase in funding costs," he said.

Growing competition between banks in New Zealand could also be a factor keeping mortgage rates down, Eaqub said.

If Australian banks were paying more for funding he said, it would be safe to assume their local counterparts were in the same situation when borrowing from offshore.

"Funding for banks is quite unusual at the moment. All this uncertainty ... with Greece and what the endgame is going to be with Europe - that's been the big issue," Eaqub said.

Despite this, Kiwibank, ANZ New Zealand and ASB said they had no immediate plans to put up rates.

Kiwibank communications manager Bruce Thompson said it was difficult to compare the New Zealand banking industry to its counterpart across the Tasman.

Yesterday, Westpac could not comment on any potential rate increase.

"The increasing cost of funds and the instability in Europe provide challenges but, as always, Westpac remains focused on providing competitive options for our customers," a spokesperson said.