RBA Cash Rate Versus Standard Variable Home Loan Rate

The RBA cash rate remains unchanged at 1.5%...nothing to see here unfortunately. I suspect I am probably one of the few that are really looking for an interest rate rise rather than the talk about a cut. When interest rates are going up, our economy will have turned the corner, full time employment will have improved and people in theory should have more money in their back pockets.

But let me share this one picture with you. The below graph demonstrates the margin being applied by banks over the standard variable home loan rate. In the pre GFC era, the margin was 1.8%. This would equate to a standard variable rate today of 3.3%. However the margin banks are charging over the standard variable rate is now at 3.75%.

"Financial markets are functioning effectively. Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative. Government bond yields have risen, but are still low by historical standards." Philip Lowe, Reserve Bank of Australia Governor.

Somewhere along the line things changed and have never been back to the "good old days". That inquiry into banks by the Senate might have made the news for a couple of nights running, but can the leopard change its spots? I suspect the banks are patting the government on the head, feigning interest (pardon the pun) and back to business as usual...but then I might just be a bit cynical. I guess I will just have to wait and see how reporting season goes for the banks :-/