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Wednesday, 23 August 1972
Page: 373

Senator POYSER (VICTORIA) asked the Minister representing the Treasurer, upon notice:

(1)   Were housing loan interest rates increased about 2 years ago at the same time that interest rates generally were increased.

(2)   Did housing loan interest rates remain unchanged when other interest rates were recently reduced.

(3)   Does the Government intend to reduce the crippling interest rates which are now operative in the housing loan field.

Senator COTTON - The Treasurer has provided the following answer to the honourable senator's question:

(1)   There was an increase in housing loan interest rates in the first half of 1970 when there was a general increase in interest rates.

(2)   and (3) Recent monetary policy action has included reductions in trading bank borrowing and lending rates, reductions in yields on government securities and a substantial release from trading banks' Statutory Reserve Deposits.

The reduction of 0.5 per cent in the maximum trading bank overdraft rate will have a direct effect on the cost of housing finance (including bridging finance) provided by the trading banks. Savings bank interest rates on housing loans in excess of their normal first mortgate limit - for which the maximum overdraft rate can be charged - will also be reduced by, 0.5 per cent. Savings bank interest rates on housing loans are in any case still very low in the interest rate spectrum and contain a considerable concessional element.

In addition to these particular reductions the easier stance of monetary policy has resulted in a substantially increased supply of loanable funds in the private sector generally and consequent downward pressure on private interest rates, including lending rates for housing. Permanent building societies in Queensland have reduced their maximum lending rates from 8 per cent to 7.25 per cent per annum and permanent building societies in Western Australia have announced reductions of 0.5 per cent in their lending and borrowing rates of interest. As the effects of the easier monetary stance are transmitted throughout the financial system in coming months, other lenders for housing can also be expected to reduce their lending rates. Moreover, the very liquid positions of the banks and building societies should considerably reduce the need for home buyers to seek higher cost finance from other sources. Aside from these considerations, the new Commonwealth/State housing arrangements have allowed the States to provide housing finance at lower rates of interest than would have been possible had the previous Commonwealth Housing Agreement continued. Borrowers have benefited from a reduction in interest rates on their loans from either the State housing authorities or from building societies which make use of money made available to them from Home Builders' Account.

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