(23 November 2009 – Australia) The Reserve Bank’s assistant governor, Guy Debelle, has said that the margins have actually declined on home loans over the past two years, encouraging banks to increase mortgage rates.In a speech at a banking conference in Sydney, Mr Debelle highlighted that the margin between standard variable home loan rates and the official cash rates had widened as banks held onto some of the Reserve Bank’s rate cuts.
Banks, however, have kept their standard variable rate within the RBA’s announcements after the Treasurer, Wayne Swan, said that lifting rates outside of the official cash rate was unjustified and could endanger the effort needed to sustain economic recovery.
The Reserve Bank believes the banks’ margins on home lending are declining overall because they are paying more for money sourced from overseas and they are paying substantially more interest on Australian deposits.
The RBA’s quarterly economic review released this month noted that the average rate offered by the big banks for so-called term deposit specials had risen by 0.72 percentage points since July to 5.43 percent, and is up about 1.75 points since early 2009.
Mr Debelle also noted that the banks’ gentle treatment of mortgage holders had been ‘more than offset’ by a widening in their margins on business and personal loans, which was reflected in recent profit statements.
None of the Big Four have ruled out lifting the interest rate outside of the RBA’s movements and Phil Coffey, chief information officer, Westpac, recently said that increasing costs of funding home loans will be one of the factors that the bank would consider as they determine interest rate pricing in the future.