ANZ first to lift variable rates independent of the RBA?

[MichaelW]

H Guys,

Appears the insider money is on the ANZ being the first to lift rates independent of the RBA, but the consensus is the others will all follow suit. With the cost of funding still at much more expensive levels than pre-crisis it makes sense they'll start to try and cover this at some point and not subsidise their resi book with their commercial book.

Braced for the shockwaves

These older low-interest-rate loans will be maturing right up until 2012 and it means that the cost of overseas funding for the local banks is going to continue to rise. At present, some banks are finding it cheaper to borrow offshore than to raise deposits in Australia because of fierce competition in local bank deposit rates.

The bankers speculate on which Australian bank will be first to put their interest rates up independent of the Reserve Bank to reflect these higher borrowing costs. The betting is on the ANZ, but no one can be sure. Most will follow the leader.

Anyone else care to speculate on who or when? If the banks themselves are pondering this decision then it can't be too far off...

Cheers,
Michael

 

[vbplease]

If/when they do, it may postpone the first RBA rate rise, which might have be soon anyway.. will come out the same in the wash I think..

 

[Rolf Latham]

I cant see any good reason why the RBA would need to nobble the economy at this stage ?

Just a couple of weeks ago the Fed Gov was pouring 100 mill or so into job creation programs because of the sluggish recovery.

So which is it ? I know its not an exact science, but such conflicting messages I find very confusing.

The underlying costs of lending increasing will do enough damage to the confidence of the current recovery without the RBA having to justify its existence.

ta
rol

 

[sash]

Give credence to my last thread about the interest rates rising.....

We are definitely in for a interesting time in the next couple of months.

 

[Ausprop]

with the looming resources boom interest rates will need to rise, just as in 2006/07 when we had (and still have) some of the highest rates inthe world. The problem of a 2 speed economy may return tho, with Sydney devestated by the loss of the financial magicians and in reality needing lower interest rates (not from a housing perspective tho - the banks have seen to it that there is a supply problem).

The good news is tho... rates will only go up because the good times are back

 

[Token Funder]

My money is on CBA moving first. They've been holding their breath longer than others.

 

[MichaelW]

My money is on CBA moving first. They've been holding their breath longer than others.

That "holding their breath" analogy shows this to be a classic chicken dilemma in game theory. Although that's a two player game model, it still really applies to the 4 pillars as the balance of the banks move en masse anyway.

So, staying the course and not "swerving" their rates will result in all banks crashing as their cost of funding runs higher than their variable mortgage rates. i.e. the unsustainable outcome. But he who swerves first and raises rates runs the risk of the other holding course and picking up a lot of market share. The slight difference here is that holding course in a classic chicken game makes you the outright winner, but where the big 4 are concerned holding course still loses you money so they're all on track to raise rates. Just that the bank that moves first will cop a PR shellacking!

WBC and CBA both went after resi market share and have achieved that outcome, and the fact that our house prices have held up suggest that was the correct course of action. ANZ and NAB took the conservative balance sheet protection course which now seems to have been the wrong one. Only time will tell, but so far WBC and CBA seem to have been playing the game better than their opponents who have taken differect tacts. NAB seems to be playing catch-up now though.

Cheers,
Michael

 

[Peter 14.7]

Whoever goes first will get blasted in the press. 2nd, 3rd and 4th get to say we were just following (market) orders

And if the RBA go up even 0.25%, a tap on the brakes say, I would bet big time we would get rises of 0.4% justified by cost of money, blah,blah...

The fact is we have NO competition anymore in Australia. I.e. challenger sucked into NAB? We need another John Symonds type to "save us'.

But with most other banks in the world too busy having car washes to just surviv,e there is 2 chances of a serious outside competitor coming to Aus. Bankwest (HSBC) where art thou....

I foresee a FHO topping off, a middle class boom, and good time for anyone owing property. Great time to be early in development.

Peter 14.7

 

[MichaelW]

Great time to be early in development.

Peter 14.7

Thanks mate!

Just got to get off my you-know-what and get on with it. Finance pre-approved and DA in place, just got to do the schedule of finishes and tender it.

Too much on at present following the move and all...

Cheers,
Michael

 

[Peter 14.7]

Too much on at present following the move and all...

Cheers,
Michael

That is my world, where is that new cafe and house again says the wife?

Peter

 

[rugrat]

I can handle the rises - I just don't want them to happen too soon, it'll mess my servicability up and I may end up having to go back to work sooner then I planned (I am on maternity leave) to get the loan for my IP which is due to settle next year, if they rise too much too soon.