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RBA governor frustrated with credit card rates
The Reserve Bank of Australia remains frustrated with the high cost of credit cards, which they believe is continuing to be a drain on consumer spending, the governor explains.
RBA governor frustrated with credit card rates
The Reserve Bank of Australia remains frustrated with the high cost of credit cards, which they believe is continuing to be a drain on consumer spending, the governor explains.
During the Parliament economics standing committee meeting on Friday, RBA governor Philip Lowe lashed out at credit cards which continue to charge higher rates despite the fall in the official cash rate.
“I have frustration that there are still credit cards in the Australian marketplace with interest rates around 20 per cent,” Dr Lowe said.
“People write to me all the time and say, ‘This is a disgrace’ and ‘How can this possibly be?’ and I have to say I don’t have a good response for them, other than: there are credit cards in the Australian marketplace with much, much lower interest rates — perhaps high single digits.
“I say to people with mortgage debt, shop around, because there are good products out there in the marketplace that offer people much better deals.”
Dr Lowe has heaped the pressure on underperforming credit products, urging Australians to switch products to force higher lending standards.
“It is an issue, but the way to solve this is through people shopping around, and I’ve been giving that advice to people with mortgages all the time,” Dr Lowe said.
“That’s actually been working, because we’ve seen the average mortgage rate paid by Australians decline over the past six months by quite a lot, even though some of the posted rates haven’t changed, because people are moving to banks that offer them a better rate. So the same process can work with credit cards.”
Separate research from the Australian Bureau of Statistics showed credit cardholders are looking to take advantage of record-low interest rates through the reduction of their home loans.
The latest ABS Lending Indicators data shows 237,632 people have refinanced since the start of COVID; however, last month’s figures are down considerably from the May 2020 peak.
The total value of new loan commitments for housing rose by 8.6 per cent to $26 billion in December 2020, seasonally adjusted, a 31.2 per cent increase on December 2019.
The value of new owner-occupier home loan commitments rose by 8.7 per cent to $19.9 billion in December 2020, 38.9 per cent higher than December 2019.
ABS head of finance and wealth Amanda Seneviratne said: “Loan commitments for existing dwellings accounted for 53 per cent of December’s rise in owner-occupier housing loan commitments, while construction of new dwellings accounted for 32 per cent.
“The value of construction loan commitments grew by 17.1 per cent in December, more than doubling since the June implementation of the HomeBuilder grant.”
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