Banks are making a profit of almost $80,000 on each new mortgage customer over the lifetime of the loan - the highest level in almost a decade.
Experts say it makes out-of-cycle rate cuts "inevitable'' as competition grows.
They say the surge in profit levels -- the Big Four pocketed more than $25 billion last year -- has been driven in recent months by a huge lift in the profit margin of millions of Australian home loans.
UBS analyst Jonathan Mott warned of a political backlash if the majors didn't cut rates outside the Reserve Bank's movements.
"There is a real risk politicians will step in and regulate the market to ensure consumers get a better deal,'' he said.
The new research shows the banks are making an annual profit of about $2640 on the average $300,000 mortgage, representing a profit of $79,200 over the lifetime of a 30-year mortgage.
But Mr Mott said the surge in profits from the mortgage sector was being eroded by losses made on the banks' generous term deposit rates.
Since November 2011, the RBA has lowered the official cash rate by 1.75 percentage points to 3 per cent. But over the same period, on average, the Big Four dropped their mortgage rates by only 1.36 per cent to the standard variable rate of 6.42 per cent.
Reproduced in full with permission: News Limited Network Super profits on mortgages 26 February 2013
Attention: This article is intended to provide general information only. Every attempt has been made to ensure the accuracy of this information at the date of publication. The opinions expressed in this article do not reflect those of DHA, its staff or agents. Property prices are subject to fluctuation. Prospective investors should seek independent advice. DHA will not be liable for any loss, damage, cost or expenses incurred or arising by reason of any person relying on information in this article.