The average interest rate on all outstanding housing loans has fallen by around 15 basis points since the cash rate was reduced in August 2013.
The Reserve Bank looks set to leave rates on hold “for the next year at least” after noting that lower funding costs and competitive pressures have seen mortgage rates continue to edge down over the last month.
In the minutes of its monetary policy meeting on September 2, RBA members noted that Australian banks continued to raise funds relatively cheaply, with a recent issue of residential mortgage-backed securities being of record size in the domestic market and occurring at the tightest pricing since the financial crisis.
Members noted that Australian banks continued to report improving asset performance and strong profits, which had contributed to further increases in their capital ratios.
“Australian banks and non-banks had both benefited from easier wholesale funding conditions globally,” the minutes said.
“This in turn had encouraged stronger competition in lending for housing and to large businesses, but members noted that this had not, to date, led to a general easing in mortgage lending standards and policies,” it said.
“For investors in housing, the pick-up in housing credit growth had been more pronounced than for owner-occupiers, with investor demand particularly strong in Sydney and, to a lesser extent, Melbourne.”
The RBA further observed that additional speculative demand could amplify the property price cycle and increase the potential for property prices to fall later.
“The main risks in such a scenario would likely be to the stability of the macroeconomy rather than the financial system, particularly if households were to react to declines in their wealth by cutting back on their spending,” it said.
“Members were also updated on some of the recent actions by the Australian Prudential Regulation Authority in this area.”