Card margins much wider; mortgage margins also wider.
While banks and other lenders ponder how much of the 100 basis point reduction in Australia's official cash rate, announced yesterday, to pass through to their customers, a review of pricing of two streams of consumer loans suggests banks have continued to increase the spread they earn on these loans.
This comparison takes a simple, and limited, measure to evaluating a bank's cost of funds, and just uses the Reserve Bank's cash rate as the indicator. In reality bank's' funding costs are higher, given the very high spreads banks have had to pay for wholesale funding over recent months and will depend on the pricing mix of each lender's deposit book.
Even so, there are signs of increasing spreads on consumer loans.
Money Zone, or MoZo - a new supplier of comparative interest rate and other information on consumer loans - reviewed 21 prominent home loan products and 122 credit cards for this exercise.
Between early November 2008 and early this week the analysis shows an upward trend in the margin between the cash rate and standard variable home loans, rising from 2.25 percentage points in November 2008 to 2.41 percentage points in February.
Among the five larger banks (and treating St George Bank separately for this exercise) the spread increased from 2.39 percentage points in November to 2.59 percentage points in February
On the MoZo data only three lenders did not increase their home loan margins over the period: Bendigo Bank, ING Direct and Members Equity.
This exercise includes some very low- priced loans (such as from ANZ's onedirect brand) but does not allow the discounting, to the extent it continues, on advertised variable rates.
On credit cards, lenders increased the spread they earned over the cash rate, from 11.28 per cent on average in early November 2008 to 12.69 per cent early this week.
There were no reductions in credit card interest rates on a majority of the credit cards included in the MoZo product review and in one case a lender increased their its rates (American Express on the Ascent Membership Rewards card).
Where lenders did cut the credit card rate in recent months the cut was in almost all cases by only one percentage point.