Banks are being called upon to pass yesterday’s rate cut on in full, with Housing Industry Association (HIA) senior economist, Shane Garrett, arguing more help is needed to add to fuel to a ‘fledgling’ residential construction recovery.
"It is crucial that banks pass this rate cut on in full to mortgage borrowers and small business loans. On most occasions in recent years, banks have pocketed part of the interest rate cuts rather than allowing their customers to receive the full benefit," says Garrett.
The RBA has reduced the cash rate by 225 basis points since November, 2011 and Garrett says the benefits of the cuts have been felt across the housing industry.
"Lower interest rates have helped to support a modest though hesitant recovery in residential construction activity. There have also been significant cash savings for borrowers with variable rate loans. On a $500,000 mortgage with 30-year term, the monthly repayments have fallen from $3,300 in January, 2011 to $2,679 today. Had the banks passed on the rate cuts in full, the fall in repayments would have been even larger," he adds.
While Garrett admits interest rates are ‘only one part of the housing equation’, he says weakness in the market is being compounded by the ‘huge’ tax burden on new home building, impediments on releasing suitable residential land and ‘excessive’ regulation of the industry.
" We look forward to these issues being addressed during the election campaign.”