INTEREST RATE MARGINS Sydney, 13 August, 2002: The Australian Bankers’ Association says personal and small business borrowers continue to receive the gains in savings on loan repayments from the fall in interest rate margins from their levels in the mid-1990s. David Bell, Chief Executive of the Australian Bankers’ Association (ABA) said a small rise in interest rate margins as reported by the Reserve Bank of Australia (RBA) is a perfectly normal competitive outcome and does not indicate ‘gouging’ as reported in the media today. “The comparison of cash rates and bank indicator lending rates do not reflect increasing or decreasing profit taking by banks as these movements may well be off set by movements in wholesale markets where rates reflect expectations about interest rates.” Mr Bell said financial institutions (banks, building societies, credit unions, mortgage originators) – like all other businesses – will see fluctuations in their business margins. “This is not surprising given the multiple factors that impact on margins, including costs for branches, employment, research and development.” “But importantly, home borrowers and small business are still enjoying the savings from massive cuts in interest rate margins from the mid 1990s. This is shown in the Reserve Bank graphs below.” “Indeed, interest rate margins on home loans have fallen more than three percent since the mid 1990s, they still remain at low levels of less than two percent and any movement up or down is in a very small range. This margin squeeze equates to a saving on a $100 000 home loan of more than $100 per month.” Please see over for graphs from RBA Statement on Monetary Policy, 12 August 2002. Graph 56 – Source: RBA Statement on Monetary Policy, 12 August 2002   Graph 57- Source: RBA Statement on Monetary Policy, 12 August 2002   For further information contact: Heather Wellard ABA PR Phone: 02 8298 0411 Mobile: 0409 830 439 ENDS