PRIME MINISTER
FOR PRESS 19 NOVEMBER 1978
REDUCTION IN BANK INTEREST RATES ON HOME LOANS
The Prime Minister today welcomed Friday' s announcements by the
Chairman of the Australian Bankers' Association and the
Governor of the Reserve Bank of Australia that the
savings and trading banks are prepared to reduce interest
rates on most new and existing home loans.
The announcements, which follow discussions between the
Reserve Bank and the Australian banks, state that lending
rates on most bank housing loans will be reduced by 0.5 percent
where the borrower resides or intends to reside in the home.
The savings banks have also indicated their intention to
reduce their interest rates on savings investment accounts
by approximately 0.25 percent.
These reductions follow an earlier reduction in savings bank
interest rates of 0.5 percent in Feburary this year. The
Prime Minister said that these reductions will be of great
benefit to home owners using bank finance and to prospective
home buyers.
For home buyers with a home loan of $ 25,000 being repaida
over 25 years, the total I percent reduction in interest rates
will mean a saving of the order of $ 17 a month $ 5,000 over
the period of a new loan.
The Government's anti-inflationary policies have created the
economic environment in which such reductions in interest rates
are possible. These reductions will be further strong
confirmation that the Government's economic policies
are working.
The reductions in housing interest rates over the course of
this year will give a further boost to confidence and over-all
economic activity and in particular will assist the building
and related industries throughout Australia. ./ 2
-2-
The proposed reductions in bank interest rates require
similar reductions in building society rates. I have
accordingly sent a message to the Premiers in the
following termus:
My dear Premier,
By now you will no doubt have heard that the Chairman of the
Australian Bankers' Association and the Govprnor of the
Reserve Bank have announced that savings and trading banks
have indicated a willingness to make significant reductions in
housing interest rates and interest rates on savings
investment accounts.
You will recall that we discussed the desirability of
reductions in housing interest rates at the Loan Council
meeting in Melbourne on 6 November.
We agreed that it is desirable that the rates f or banks
and competing institutions, and in particular building
societies, should come down in co-ordination.
in the light of Friday's decision by the banks I would urge
you to seek such comparable reductions in building society
rates as you believe to be practical and responsible. I should
be grateful if you would inform me of the progress of your
consultations with the building societies.
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