Low interest rates don’t necessarily mean a return to the 1960s for the property market

The cash rate may be back to what it was in January 1960, but it was a different era for those seeking a home loan.

For those who missed it, the RBA’s decision to cut the cash rate to 2.75% last week meant that the benchmark borrowing rate fell to a 53-year-low below a ‘cash rate’ setting of 2.89% in January 1960.

This was not the official benchmark figure it is today, since the Reserve Bank did not publish a cash rate target until January 1990.

Rather the cash rate was a proxy measure of short-term interest rates at a time when the banking sector was highly regulated and getting a home loan meant making an appointment with your bank manager and wearing your best suit to an interview.

There were no foreign banks, no discount online mortgage offerings, nor the plethora of different mortgage products tailored for different types of borrowers and investors.

There were no honeymoon rates, low-doc loans, reverse mortgages, packaged home loans or off-set accounts with such product innovation only coming to the fore in the late 1990s and early 2000s.

Getting a good home loan rate meant having a good relationship with your bank manager.

The headline home loan rate was also lower at 5.00% through 1959 and 1960, according to CommSec chief economist Craig James compared with an average standard variable rate of around 6.17%, according to RateCity.com.au following the 25 basis point reduction.

However, a standard variable rate would not even have been quoted in 1960s, with most home loans on fixed-rates with “flexible” mortgage rates only appearing more commonly in the mid-1960s. Certainly most of the Commonwealth Bank’s lending would have been done on fixed-rates.

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