RBA versus the Banks

For years the spread between the RBA base rate and the mortgage rates for the banks remained constant at around 1.82%. The RBA started to increase the base rate in May 2006. The RBA rate hit a high of 7.25% in March 2008.

In April 2008 and July 2008 the banks increased their interest rates independently of the RBA – by around 0.14% and 0.16% respectively, to a high of 9.62%.

In September 2008 the RBA started to cut the base rate. Since then the RBA has cut the base rate by 4.25%, to the current level of 3.00%. But the banks have only cut their rates by only 3.88% – meaning that the banks now have a spread of 2.74%. The spread is now nearly as much as the RBA base rate – and increase of 0.92% over the long time spread.

If the banks were to return to their old spread of 1.82% this would translate into a saving on a $300,000 mortgage of over $2000 per year. How much good would that $2000 do for the economy?

RBA vs Bank

Note: the mortgage rates are taken from various source and are only an indication of the average standard mortgage rates.

Advertisements