The days of cheap home loans are running out as regulators force the banks to put more money aside for a rainy day, and it’s likely that everyday Australians are going to foot the bill.

The Australian Prudential Regulation Authority (APRA) on Wednesday told banks they would need to put more money aside to protect them in another economic crisis. That means they will have to put more money into very conservative assets and consequently will have less to lend out.

It’s a move that will cost the banks about $8 billion, but they have until 2020 to make it happen. That figure is likely to go to $18 billion later this year when APRA ups the risk weighting on mortgage debt held by the banks, according to investment bank UBS.

“The move marks another step on the inevitable path to increasing interest rates,” said Martin North, banking expert and principal at Digital Finance Analytics. “The RBA has said cash rates of 3.5 per cent would be normal and the government is going to introduce the bank tax. ”

All that is building pressure on the banks to raise rates to protect their profitability.

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Nicki Hutley, chief economist with research group Urbis, said effects won’t be felt straight away as the banks have two and a half years to get to the new rules. But “APRA has said meeting the target will add 10 basis points to interest rates”.

To raise the money needed, owner occupied home loans will have to be targeted because they represent such a big part of the market, Mr North said.

Home loans make up 40 per cent of the loan market according to the latest Reserve Bank of Australia figures. Mortgage rates have fallen with the the RBA cash rate, which has come down from 7.25 per cent 10 years ago and they have been spared some of the pressure elsewhere in the system.

APRA in March forced the banks to cut their limit on interest-only loans from 40 per cent to 30 per cent of total residential lending by the end of the year to reduce the risk from investment property lending. And back in late 2014 speed restrictions were introduced to prevent residential investment loan books growing by more than 10 per cent a year.

That has all pushed up residential property investment mortgage rates to around 6 per cent. Personal loans, which often fund spending like car purchases and weddings, have interest rates of 12 to14 per cent with major banks. They have been held steady in recent years despite falling official rates.

And credit card rates have actually risen slightly while the rate environment has fallen.

Given the rises already in other lending areas and their small relative size on banks loan books, home owners will be hit to meet the costs of APRA’s new requirements, Mr North said

“SME’s and home mortgages will be the targets of rate rises,” Mr North said, adding that corporate lending could also be tightened.

Bank shares actually rose following APRA’s announcement because investors thought the regulator might have taken tougher action than it did.