Interest rate cuts 'not encouraging mortgage uptake'

A senior figure at the Reserve Bank of Australia (RBA) believes the recent interest rate reductions have not prompted people to take out mortgages.

Speaking to the Herald Sun, the central bank's assistant governor Guy Debelle said people are under financial pressure at the moment and many are unwilling to take on extra debt.

Instead, he added, Aussies are using the cuts to pay off some of their existing arrears.

The RBA slashed the national cash rate by 50 points in May and then made a second 25-point adjustment earlier this month.

This followed on from two consecutive reductions towards the end of 2011 – leaving the official rate at 3.5 per cent.

"We don't expect credit going back to the pace it was in the mid-2000s, or household spending going back to that pace," Mr Debelle was quoted as saying.

The RBA representative also noted that activity in the housing market at the moment is about as low as it was 20 years ago.

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