SMEs struggling with lower rate cuts
(19 June 2012 – Australia) Small businesses have received less benefit than home owners from the latest cycle of interest-rate cuts, new figures from RateCity show, despite the alleged target on SMEs by the major banks.
The major banks' average rates for secured small-business loans will have fallen by 100 basis points since the Reserve Bank of Australia (RBA) started cutting rates last November.
Home-loan customers will have received a bigger 103-basis point drop in mortgage rates, with the big four's average standard variable considerably lower at 6.76 percent, while SMEs will have a rate of 7.53 percent.
RateCity spokeswoman, Michelle Hutchison, said weaker competition in business lending may have contributed to the widening gap, alongside the higher risk of default by small-business borrowers.
''Higher risk often brings higher costs, so it makes sense for interest rates to remain higher for variable business loans compared to variable home loans,'' she said.
ANZ also told a Senate inquiry last week that the number of small-business borrowers falling behind was continuing to rise, and this was pushing up the delinquency rate across its commercial lending book.
An RBA submission to the same inquiry said small businesses lending rates had been hit the hardest by the increase in bank funding costs in recent years, when compared with mortgage borrowers and larger corporate customers.
Home-loan customers will have received a bigger 103-basis point drop in mortgage rates, with the big four's average standard variable considerably lower at 6.76 percent, while SMEs will have a rate of 7.53 percent.
RateCity spokeswoman, Michelle Hutchison, said weaker competition in business lending may have contributed to the widening gap, alongside the higher risk of default by small-business borrowers.
''Higher risk often brings higher costs, so it makes sense for interest rates to remain higher for variable business loans compared to variable home loans,'' she said.
ANZ also told a Senate inquiry last week that the number of small-business borrowers falling behind was continuing to rise, and this was pushing up the delinquency rate across its commercial lending book.
An RBA submission to the same inquiry said small businesses lending rates had been hit the hardest by the increase in bank funding costs in recent years, when compared with mortgage borrowers and larger corporate customers.
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