Sage Journals: Discover world-class research

Abstract

The contention of this article is to ascertain whether or not the selected Australian home loan interest rates exhibit the expected cyclical and seasonal variations, and whether seasonality, if present, is stochastic or deterministic. The article uses a structural time series modelling approach and product-level home loan interest rates data from two major banks in Australia, National Australia Bank (NAB) and Commonwealth Bank of Australia (CBA).1 The modelling results overall confirm cyclicality of the selected home loan interest rates. Although most of the variables analysed also show the presence of statistically significant seasonal factors, the majority of the statistically significant seasonal factors observed cannot be attributed to any of the three considered seasonal effects.

Keywords

Cyclicality Seasonality Structural Time Series Modelling Home Loan Interest Rates Home Loan Pricing Strategies JEL Classification: G - Financial Economics JEL Classification: G21 - Banks;JEL Classification: Other Depository Institutions JEL Classification: Micro Finance Institutions JEL Classification: Mortgages

Get full access to this article

View all access options for this article.

References

Al-Sad, K. , & Moosa, I.A. (2005). Seasonality in stock returns: Evidence from an emerging market. Applied Financial Economics, 15(1): 63–71.

Australian Taxation Office, Income Tax Assessment Act 1997. Retrieved from http://law.ato.gov.au/atolaw/execute_search_java.htm.

Berger-Thomson, L. , & Ellis, L. (2004). Housing construction cycles and interest rates, Economic Group, Reserve Bank of Australia. Retrieved from www.rba.gov.au.

Campbell, F. , & Lewis, E. (1998). What moves yields in Australia, Reserve Bank of Australia. Retrieved from www.rba.gov.au.

Ellis, L. , & Lowe, P. (2002) The smoothing of official interest rates, Reserve Bank of Australia. Retrieved from www.rba.gov.au.

Harvey, A.C. (1985). Trends and cycles in macroeconomic time series. Journal of Business and Economic Statistics, 13(3): 216–27.

Harvey, A.C. (1990) Forecasting, structural time series models and the Kalman filter. Cambridge: Cambridge University Press.

Harvey, A.C. , & Scott, A. (1994). Seasonality in dynamic regression models. Economic Journal, 104(247): 1324–45.

Harvey, A.C. , & Todd, P.H.J. (1983). Forecasting economic time series with structural and Box-Jenkins model: A case study. Journal of Economic and Business Statistics, 1(4): 299–307.

10.

Karamujic, M.H. (2009a) The determination of home loan interest rates and an empirical assessment of their cyclicality and seasonality in Australia. Saarbrucken, Germany: VDM.

11.

Karamujic, M.H. (2009b). A classification of home loan products in Australia. Refereed proceedings of 2009 PRRES Conference, University of Technology Sydney, Sydney, 18– 21 January.

12.

Koopman, S.J. (1997). Exact initial Kalman filtering and smoothing for nonstationary time series. Journal of American Statistical Association, 92(440): 1630–38.

13.

Koopman, S.J. , Harvey, A.C. , Doornik, J.A. , & Shephard, N. (1995) Stamp 5.0 structural time series analyser modeller and predictor. London: Chapman and Hall.

Comparative Analysis of Australian Residential Mortgage (Home Loan) Interest Rates

Abstract

Keywords

Get full access to this article

References