If you’re looking to take out a home loan for your business, this could be the case.
The Reserve Bank of Australia (RBA) said Thursday it’s considering writing off some of the savings deposit clients typically save to cover rising interest rates on their bank accounts.
The move would mark the country’s biggest negative interest rate move since the global financial crisis.
So-called ”profit calculators” will be available in the A$7 trillion ($5.8 trillion) banking system that would allow customers to determine the impact on their savings if they take out a mortgage or interest-rate swap.
These calculators have existed for the past year.
This will be the first time the federal government is considering reversing policy, though Minister for Business Kim Carr said it’s possible in the future.
”The Reserve Bank’s view is that banks’ interest rates should reflect a change in risks associated with the financial system,” Mr Carr said in a statement.”The introduction of profit calculators for mortgage customers is designed to help them make timely decisions.”
Customers saving for savings accounts would then benefit from this change, rather than have to invest in unmarketable commodity futures.
If a customer takes out a bank-paid business loan, the profit calculator will note the rate of return on the investments, and then adjust the interest rate calculation accordingly.
Although not directly linked to the negative interest rate change, the change in rates on bank deposits is a key factor in how banks use to calculate interest payments.
The RBA said that from 2019 customers holding bank-paid savings accounts or interest-rate swaps would see an average 12 per cent cut to their deposits in interest.
Business interest rate swap rates averaged 2.1 per cent across the banking system in July, the RBA said.
Another step left to be taken is an increase to the amount of cash deposited in the bank system. The current average level is one basis point, about 0.05 per cent.
It said that as part of the plan to reduce interest costs banks should also review their books of business deposits held by their customers.”There is no certainty that such processes will result in lower interest costs for banks.”
While Mr Carr said interest payments were a low-income tax, it was still expected more than 60 per cent of Australians were directly affected by negative interest rates, which the government has previously said will drive up the cost of credit for families.