RBA backs banks on home loan rates

The Reserve Bank reported yesterday that “lending rates have tended to move in line with funding costs over the past 12 months.”

The RBA said that during 2012 the average interest rate on outstanding variable-rate housing loans increased by about 40 basis points relative to the cash rate. “This increase is consistent with the overall increase in banks’ funding costs, suggesting that risk margins were largely unchanged.”

“By contrast, the average interest rate on new variable-rate housing loans increased by around 35 basis points relative to the cash rate, reflecting a small increase in the average size of discounts offered by banks to new customers, as competition for mortgage lending remained strong throughout the year.”

The analysis undermines one media meme of 2013, namely that banks have the scope to cut lending rates and should do so.

Source: Banking Day

Advertisement