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Recent “notable declines” in interest rates will assist new borrowers, the Reserve Bank of Australia’s Deputy Governor said at an investment conference earlier today.
In an address to Citi’s third annual conference Deputy Governor Ric Battelino said interest rates on new loans were 10 to 15 basis points lower than those recorded earlier this year.
“Increased competition among banks in response to the increased availability of deposits and relatively subdued demand for loans, has also resulted in some shaving of interest rates on standard variable mortgage loans for new borrowers,” Mr Battelino said.
“Banks have passed through to borrowers notable declines in interest rates on term housing loans and some business loans, as their cost of funds has declined.”
Households have returned to traditional mid-1990s patterns of financial behavior, he added.
After 10 to 15 years of increased gearing and reduced savings, spending activity has become more conservative.
This structural change in financing and spending has seen household credit rates slow and consumer saving increase.