Home Loans Margins of Major Australian Banks Hit Record Levels Last Year
It has been recorded by RBA that the home loans margins of the four major Australian banks hit highest levels in the past year.
This change is seen due to low interest rates by the RBA, as well as the tighter lending rules and lower funding costs. The RBA noted that, “It marked a rare divergence, given lending rates and funding costs tend to move in line with each other in the longer run”.
RBA claimed the boost last year to their implied spread from higher lending rates was entirely due to increases in housing lending rates”. RBA said, “The implied spread on housing lending (is) now higher than the previous peak in 2009.”
In the October last year, all the major banks made the lending standards strict to cope up with the APRA guidelines. In addition, borrowing capacity for property investors was also increased.
The RBA acknowledged that its calculation of the big banks’ implied spreads “does not account for the increased share of relatively expensive equity funding” from the $21bn in capital they raised, thus the boost from housing lending is “likely to overstate the true change in major banks’ margins for this activity”.