The global financial crisis (GFC) did not stop the flow of credit to consumers looking to buy houses, despite the rising cost of funding those loans and tighter lending standards, the Reserve Bank of Australia says.
Although the GFC had a material effect on the pricing and structure of the Australian mortgage market, it did not have affect the quality of housing credit provided, RBA assistant governor (financial markets) Guy Debelle told a business audience in Sydney.
"Housing finance has been readily available throughout the crisis period, with housing credit growing at about eight per cent a year," Dr Debelle said in a speech to the Mortgage Innovation Forum on Tuesday.
"The larger banks have filled the gap left by the decline of the wholesale lenders, so that there has not been a material constraint on the quantity of housing credit available in Australia throughout the crisis."
Dr Debelle also acknowledged that it was difficult in the current market for wholesale lenders to sell low-quality residential mortgage-backed mortgages (RMBS).
"Is it expensive to sell those RMBS lower-rate tranches? Yes, it is," he said in response to a question.
"Is it more difficult than it was two years ago? Certainly. Does it increase the cost for those people relative to other participants? Yes, it does."
"I wouldn't say it is true you can't sell them at all because we have seen some deals where that has happened."
RMBS are securities whose cash flow comes from bundled together housing loans.
Dr Debelle said the higher cost of funding home loans had not been fully passed through to borrowers but banks made up for it by slugging personal and business loan customers with disproportionately greater interest rates.
"The average rate on variable rate housing loans has increased by around 110 basis points relative to the cash rate since mid 2007," Dr Debelle said.
"In contrast, banks business and personal loans have increased by even more relative to the cash rate and by more than the rise in funding costs."
Citigroup economist Joshua Williamson said Dr Debelle's speech had little to no effect on markets.
He said the market was now pricing in a 70 per cent chance, up from 50 per cent on Monday, that the RBA would raise the cash rate by 25 basis points after board of the central bank met on Tuesday, April 6.
The current cash rate is four per cent.
