The Reserve Bank of Australia says lending costs for banks fell slightly more than the cash rate in 2013, which is good news for borrowers.
"The cost of deposits fell, while the cost of outstanding wholesale debt also declined, particularly in the latter part of the year," the RBA said in its quarterly bulletin, published on Thursday.
"Relative to the cash rate, the major banks' funding costs are estimated to have declined by about 11 basis points over the year."
A move away from funding loans from term deposits to cheaper forms of bank deposits helped reduce costs, the RBA said.
Term deposits remain a significant source of funds for loans, but savers have begun to favour other accounts, such as bonus saver accounts.
The RBA said these types of accounts are a relatively stable source of funding for the banks because there are limitations on withdrawals and also have minimum monthly deposits.
"The fall in the overall cost of deposits was in sharp contrast to the years immediately following the global financial crisis, where deposit market developments were often a key driver of the increase in banks funding costs," the RBA said.
Because of the lower costs, commercial banks have been able to reduce their lending rates.
"The average interest rate on new variable-rate housing loans fell by about 10 basis points relative to the cash rate as discounts were increased," the RBA said.
"Moreover, the average interest rate on some new fixed-rate housing loans relative to expectations of the cash rate also fell over 2013."
The RBA noted that the trend in rising loan funding costs since the global financial crisis has now been reversed, but they remain 130 basis points higher than before the GFC.
