Are lenders taking advantage of borrowers? Despite interest rates falling this year, lenders have hardly moved the interest rates they charge on credit cards and personal loans.
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The Reserve Bank cut rates by 0.25 percentage points, on two occasions this year, in February and in May, for a total cut of 0.5 percentage points.
Figures from finder.com.au show the average interest rate on variable rate personal loans is only 0.2 percentage points less than at the start of this year.
That is a cut in personal loan rates of less than half the cut in the cash rate.
Of the variable rate personal loans monitored by finder.com.au most have either increased rates or left rates unchanged.
Consumers stand to benefit by shopping around as there are a wide range of interest rates on personal loans.
For instance, the lowest variable rate on a personal loan listed on Finder's database is 5.35 per cent and the highest is 17 per cent.
Credit cards
Credit card purchase interest rates have been a long-running sore for consumers.
Despite the cut in the cash rate, purchase interest rates average 17.07 per cent now. That is virtually unchanged since the start of this year.
There are other factors that come into play when lenders set their credit card interest rates, but the level of the official cash rate should also play a part.
As "unsecured" credit, it is expected credit card rates will be higher than, say, mortgage rates where the mortgage is secured against a property.
There is an ongoing Senate inquiry into credit cards. The inquiry is asking lenders to explain why interest rates are so high and why card rates have not moved lower as the cash rate has fallen.
Credit cards have a wide range of interest rates and some have rewards points – though reward cards usually have an annual fee and higher purchase interest rates.
Those cardholders who always pay off the entire debt by the due date and do not make cash advances pay no interest at all.
Mortgage rates
Property investors have been hit hard by increased interest rates on their mortgages despite official interest rates falling.
While owner-occupiers have generally seen interest rates on variable rate mortgages fall in line with the fall in the cash rate, investors have been hit with higher interest rates.
"For the last 10 years, owner-occupiers and investors have generally had the same deal on rates," RateCity money editor Sally Tindall says.
But regulators want the growth in lending to investors to slow. Investor activity has been a major driver of surging property prices in Sydney and Melbourne.
Regulators are worried that some of the lending to investors has been a bit risky, with sharp growth in interest-only mortgages – where the borrowers pay the interest and the loan size stays the same.
Over past months, more and more lenders have introduced higher interest rates for investors than for owner-occupiers.
RateCity figures show that almost half of all lenders now offer different rates for investors and owner-occupiers, with a difference of up to 0.85 percentage points.
Investors beware
Lenders have increased rates for existing property investors, not just new investors. Investors who are paying higher rates may think they will be able to refinance at a cheaper rate.
But as well as lifting interest rates for investors, lenders have been tightening their lending criteria.
Some require the investor to have a larger deposit. They have also increased their interest rate buffers, which is when a lender tests an investor's finances to see if they would still be comfortable if interest rates were to rise.
Also, some lenders are not including the tax benefits of negative gearing.
They are also discounting the expected rental income by 20 per cent.
