Westpac Banking Corporation (ASX: WBC), the Commonwealth Bank of Australia (ASX: CBA), the National Australia Bank (ASX: NAB), and the Australia and New Zealand Banking Group (ASX: ANZ) accumulated $798 billion of mortgage debt.

The high figures are almost equivalent to 66 percent of the so-called Four Pillars banks' combined loans. An increase in funding costs could prompt the private banks to raise interest rates by more than the Reserve Bank of Australia (RBA).

In November last year, the banks pulled up interest rates citing rising funding costs.

Since the beginning of 2008, the four pillars have raised more than $US102.5 billion from bonds in the US currency. The amount is around 46 percent of their total sales.

According to Morgan Stanley analysts led by Viktor Hjort, the lenders may need to sell $162 billion of bonds within the 2011 financial year. The amount is 80 percent more than the banks' annual average for the five years to 2007, but the sale remains a big consideration as banks face regulatory reforms that favor long-term capital over short-dated funding.

Moreover, concerns over the 18.4 percent increase in house values during the 2010 financial year could move the country's biggest banks to demand a higher relative yield.