Last night @randomphrase asked on Twitter about a long term chart of the spread of bank mortgage rates against the RBA cash rate. Fortunately, the RBA publishes quite a bit of interest rate data, including mortgage rates and their own cash rate the 90 day bank bill rate.

So here is a chart:

Of course, every bank offers slightly different rates, not to mention a slew of discounted and fixed rate options. So, to be clear what we're looking at, here is

‘Housing loan’ rates are those quoted for loans to owner-occupiers; in most cases, the same rates also apply to investment housing. Rates for ‘Banks’ and ‘Mortgage managers’ are the average rates of large lenders in each group. ‘Standard’ rates apply to housing loans with facilities such as the option to redraw or make early repayments.

The mortgage rate I have used is the ‘Standard’ rate for ‘Banks’, so it should just be a simple average (i.e. not market share-weighted or anything) of the rates from the big four.

It’s probably also worth noting that this spread does not necessarily give a great indication of the banks' profit margins on mortgages because (i) the cash rate is a very visible rate, but longer-term rates (say 30 day to 90 day bill rates) are a better indication of the primary component of bank funding costs and (ii) on their long-dated wholesale borrowing, both domestically and offshore, they also pay a margin which is higher today than it was five years ago.