The Reserve Bank says homeowners have used between 50 and 90 per cent of the money saved from ongoing interest cuts to pay down their mortgages ahead of schedule.
As a result, retail spending remains soft as homeowners resist the temptation to use the extra savings at the cash register.
The RBA’s research answers the question why certain sectors in the economy, such as retail, have not yet felt the stimulating effects of interest cuts, as homeowners choose to sink their extra money into paying off their mortgage quicker.
The increased mortgage repayments have had a significant drag on credit growth, with the banks providing such cheap credit.
The amount of total housing credit would have grown by around $10 billion in the last year had homeowners not chosen to pay off their debts more quickly.