Low interest rates impacting household behaviour | Pete Wargent

The AFR reported that savings rates payable by banks have been declining sharply, in many cases to levels that are lower than the inflation rate.  

While the impacts of interest rates are not necessarily instant, ultimately negative real returns are highly likely to impact the way address their household finances.

Chart pack

The latest chart pack from the Reserve Bank confirms exactly that, with the household savings ratio inching below 10 percent.

We noted this week how borrowing rates are becoming cheaper still with variable rate mortgages available from around 4.6 percent which means that household budgets in aggregate should be in very tidy shape.

Nevertheless, nearly 10 percent of household disposable income is still being saved.

Household income and consumption

Largely as a result of low interest rates, housing loan approvals are now tracking at their highest level on record.

Housing loan approvals

House prices have increased in Sydney, Melbourne, Perth and are now recovering well in Brisbane.

Housing prices

Which in turn is bringing developers in to the market. Building approvals are not quite at record highs, but they remain fairly close to it.

Private non-residental building approvals

Household wealth has continued to recover from the declines of the financial crisis.

It’s also interesting to note that with most mortgage holders so far ahead of their repayment schedules, average household liabilities have not increased all for close to 9 years.

Household wealth and liabilities

Despite the recovery in house prices, lower borrowing rates have meant that mortgage repayments have continued to become cheaper still.

At lower than 9 percent of disposable income, interest repayments are at the lowest level in around eleven years.

Household finances

You can enjoy the rest of the RBA’s chart pack here.

Want more of this type of information?

Pete Wargent


Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

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