ANZ nudges its variable rate along another notch

[Rolf Latham]

You can bet the others arent going to sit on their rates

Interesting with 2 and 3 year bond rates and retail rates softening again

ta
rolf






ANZ today announced that variable interest rates for home loans and investment loans will increase by 0.06%p.a. after its April interest rate review.
Effective Friday 20 April 2012 our variable interest rates will be:


Loan Type Current Rate (p.a.) New Rate (p.a.) Change (p.a.)
ANZ Standard
Variable Rate 7.36% 7.42% +0.06%
ANZ Simplicity PLUS 6.66% 6.72% +0.06%
ANZ Equity Manager 7.51% 7.57% +0.06%

 

[buzzlightyear]

If this doesn't send the message to the RBA to reduce rates then nothing will.

The calls from some business leaders around a 50 basis point cut was on first hearing IMO an ambit claim. I am now more convinced that we need this move at the next meeting.

 

[The Fence]

Well then it's collusion isnt it...?

Agreed Buzz....RBA then moves down and banks follow suit....all this after they hiked earlier.
And we are not supposed to be suspicious...

 

[Rolf Latham]

If this doesn't send the message to the RBA to reduce rates then nothing will.

The calls from some business leaders around a 50 basis point cut was on first hearing IMO an ambit claim. I am now more convinced that we need this move at the next meeting.

Who or what is the RBA ?

ta
rolf

 

[Propertunity]

It is interesting that up until the banks decoupled themselves from the RBA, that the only lever the RBA had was the one called Interest Rates. Now they find themselves pulling the lever, but the cable connected to the banks has snapped.

I can't help but think that banks who move independently of the RBA are being run by some cave dwelling bean counters who live disconnected from the world of customer relations and marketing. It might only be 0.06% but it is a public relations nightmare. Bring on some more Non-bank lenders!!

 

[Rolf Latham]

I can't help but think that banks who move independently of the RBA are being run by some cave dwelling bean counters who live disconnected from the world of customer relations and marketing. It might only be 0.06% but it is a public relations nightmare. Bring on some more Non-bank lenders!!

Lets see............................

I dont think it will happen with any real competition.

While the big banks have been taking the head wind of the publics' anger, almost ALL the Buildings societies, Credit Unions and non banks have moved in lock step when the big guys moved, and have got away pretty much unscathed.........


I believe the larger scale lenders have simply done a POOR pr job here.


The dust causes more business for the broker network, esp those of us that use some of the smaller guys, so I am happy that the larger lenders have stuffed it up

ta
rolf

 

[Aaron_C]

Yes it is all part of their plan to condition the public that rates are not linked to the RBA rate and it seems like the plan is working.

 

[StuartW]

My concern is the reason they are providing for the increases i.e. increase in the cost of funds. The frustrating thing is no one can verify it, because it really depends on a bank’s funding mix.

What I think is necessary is for the ACCC to verify the banks rationale for any increase. The banks should have to report their funding cost to the ACCC which is maintained confidential (not released to the public). The ACCC can then monitor the banks reasons for increasing to ensure honest disclosure. So if the bank says its cost of funds has increased, and it hasn’t, customers’ should be entitled to know (ACCC can pull them up) so customers can base their decisions on it (to stay or leave).

If ANZ’s (for example) cost of funds has actually increase by 12 bpts and it only passed on 6 bpts, then most customers wouldn’t be too angry. However, if its cost of funds is unchanged or lower, customers should be super angry and perhaps rightly refinance.

The problem is; we don’t know if what ANZ did is fair behaviour or if we should be angry.

 

[Tehanu]

My concern is the reason they are providing for the increases i.e. increase in the cost of funds. The frustrating thing is no one can verify it, because it really depends on a bank’s funding mix.

What I think is necessary is for the ACCC to verify the banks rationale for any increase. The banks should have to report their funding cost to the ACCC which is maintained confidential (not released to the public). The ACCC can then monitor the banks reasons for increasing to ensure honest disclosure. So if the bank says its cost of funds has increased, and it hasn’t, customers’ should be entitled to know (ACCC can pull them up) so customers can base their decisions on it (to stay or leave).

If ANZ’s (for example) cost of funds has actually increase by 12 bpts and it only passed on 6 bpts, then most customers wouldn’t be too angry. However, if its cost of funds is unchanged or lower, customers should be super angry and perhaps rightly refinance.

The problem is; we don’t know if what ANZ did is fair behaviour or if we should be angry.

(1) I believe they already report this to the RBA and it sounds like the RBA is supporting them.

http://www.news.com.au/business/bre...der-pressure-rba/story-e6frfkur-1226306907754

Besides the divergence between the true cost of credit and central bank interest rates is happening internationally too.

[removed part about Coles and Woolies as probably not relevant]

(2) Even if it isn't based on their real funding costs I don't see what role the ACCC has in this. There is no law or even moral right for people to gain access to ultra-cheap credit for the purposes of enriching themselves. Government intervention in order to underpin supply of cheap credit is part of what causes asset bubbles and later puts governments in danger of collapsing under the weight of the bad assets they are guaranteeing.

 

[StuartW]

(1) The RBA can comment on overseas funding costs, yes. However, I'm not sure if they know the funding mix of each bank and/or calculated the weighted cost of such. It's the mix of funding that influences the actual cost - which will be different for all banks.

(2) I'm not talking about cheap credit nor saying that government should control the cost of credit. I'm saying that someone need to police the reasons that banks give for increasing (and/or keep them honest) because I don't trust them frankly. ACCC administers the Trade Practises Act and Section 52 says you can't be misleading or deceptive. I'm not saying that banks are. I'm saying lets have someone check to ensure they are. It is against the law to lie to the general public.

My suggestion has nothing to do with cheap credit.

But then again, the ACCC can't find a way to stop the oil companies increasing petrol prices prior to public holidays so I guess we (Aust public) should just sit back and enjoy the ride.

I have a problem with Coles and Wollies too... but lets not go there.

 

[Tehanu]

(1) The RBA can comment on overseas funding costs, yes. However, I'm not sure if they know the funding mix of each bank and/or calculated the weighted cost of such. It's the mix of funding that influences the actual cost - which will be different for all banks.

(2) I'm not talking about cheap credit nor saying that government should control the cost of credit. I'm saying that someone need to police the reasons that banks give for increasing (and/or keep them honest) because I don't trust them frankly. ACCC administers the Trade Practises Act and Section 52 says you can't be misleading or deceptive. I'm not saying that banks are. I'm saying lets have someone check to ensure they are. It is against the law to lie to the general public.

My suggestion has nothing to do with cheap credit.

But then again, the ACCC can't find a way to stop the oil companies increasing petrol prices prior to public holidays so I guess we (Aust public) should just sit back and enjoy the ride.

I have a problem with Coles and Wollies too... but lets not go there.

Yes they do have access to the funding mix.

http://www.rba.gov.au/publications/bulletin/2011/mar/6.html

They have it disaggregated into major bank, regional bank and foreign banks at least. I strongly suspect they have it by individual bank.

 

[StuartW]

You're probably right... so let the ACCC use it.

If ANZ's costs have increased 6 bpts, then its customers have less to be annoyed at.

 

[Tehanu]

You're probably right... so let the ACCC use it.

If ANZ's costs have increased 6 bpts, then its customers have less to be annoyed at.

The ANZ whinge about their increased funding costs all over their annual report. If they are lying about it the ANZ CEO has a lot more things to worry about then an ACCC fine - like being banned from being a company director for years. They're not that stupid. Also they have no incentive to tell their own investors that their funding is getting more difficult if it is in fact not. Why would they lie to their investors to get them to sell their shares?

But regardless, I can't see how the ACCC is supposed to get involved. It's not even their remit - the push for reforms over ATM fees was done by the RBA not the ACCC. And this time the RBA is supporting the banks over their increased funding costs.

Banking regulation in Australia is done by the APRA, ASIC, Treasury and the RBA.

To tell the truth, the ANZ's ruthlessness in maintaining margins makes me want to open an account with them now. More likely to be stable in any financial crisis.

 

[HiEquity]

To tell the truth, the ANZ's ruthlessness in maintaining margins makes me want to open an account with them now. More likely to be stable in any financial crisis.

Yep - my first thought was that I should really take another look at loading up on some ANZ shares....

 

[Rolf Latham]

The ANZ whinge about their increased funding costs all over their annual report. If they are lying about it the ANZ CEO has a lot more things to worry about then an ACCC fine - like being banned from being a company director for years. They're not that stupid. Also they have no incentive to tell their own investors that their funding is getting more difficult if it is in fact not. Why would they lie to their investors to get them to sell their shares?

But regardless, I can't see how the ACCC is supposed to get involved. It's not even their remit - the push for reforms over ATM fees was done by the RBA not the ACCC. And this time the RBA is supporting the banks over their increased funding costs.

Banking regulation in Australia is done by the APRA, ASIC, Treasury and the RBA.

To tell the truth, the ANZ's ruthlessness in maintaining margins makes me want to open an account with them now. More likely to be stable in any financial crisis.

lets back this little truck up a little back to what I said earlier..................

Why pick on ANZ ???

Almost all the other lenders moved in parallel, AND I guess will do so again.

So where does that leave us ?

Collusion ?

Id hope note

Commercial reality, possibly

ta
rolf

 

[Tehanu]

Yep - my first thought was that I should really take another look at loading up on some ANZ shares....

I wouldn't go that far myself...A falling Australian property market isn't going to be good for the banks.

 

[Tehanu]

lets back this little truck up a little back to what I said earlier..................

Why pick on ANZ ???

Almost all the other lenders moved in parallel, AND I guess will do so again.

So where does that leave us ?

Collusion ?

Id hope note

Commercial reality, possibly

ta
rolf

The UK banks are *also* ignoring their central bank and setting rates themselves and the Irish banks are ignoring the ECB and they using the same reasoning as ANZ. There's also the same calls for political action, and complaints from borrowers as here. Though I would say the level of complaining is much louder in Australia than anywhere else. For example of overseas action:

http://www.mortgagerates.org.uk/news/mortgage-rates/

The Bank of England has kept its key bank rate pinned down at 0.5% for nearly 3 years now; this was in a bid to keep borrowing cheap for both individuals and businesses alike.

Brokers and analysts say that banks usually wait for an increase in the Bank of England’s base rate before pushing up their rates.

However the Royal Bank of Scotland (RBS)-Natwest group is now pushing up their rates by 0.25% from 3.75% to 4%. This rise will add at least £300 a year to the cost of a £100,000 home loan.

The Halifax (a state backed bank) has also announced that it is raising its standard variable rate (SVR) to 3.99% in May 2012.

This announcement comes less than a week after the bank wrote to its customers to tell them they were raising the cap on their existing mortgage rate.

The banks involved have claimed that the prices they are being charged to borrow money on the wholesale markets have risen in the past year and they have no choice but to now pass the increase on to the customers.

These increases could not have come at a worse time for hard pressed families, who are already struggling to make ends meet.

Marc Gander, campaigner of the consumer action group, said “if consumers think that the banks are suffering alongside them in this economic crisis, they really do not understand what is going on”.

Hence I would say the chief cause is that the post-WWII global monetary policy framework is breaking down and the central banks are no longer in control of interest rates. The reason why Australia is vulnerable is because since the 1990s we have become increasingly dependent on international funding markets to fund our mortgages. It was fine during the "Great Moderation". Now in these volatile times we are paying the price for our addiction to credit.

I would bet on things getting worse from here on.

 

[o0o]

Almost all the other lenders moved in parallel, AND I guess will do so again.

So where does that leave us ?

Collusion ?

Id hope note

Commercial reality, possibly

I thought collusion amongst the banks is illegal ??

If it is then that's a strong word to use which means it's more likely a case of the others simply wanting to offset their funding costs too.

 

[StefanA]

US UK Australia
cash rates 0.25%, 0.5%, 4.25%
unemployment rates 8.2%, 8.4%, 5.2%

Obviously the RBA thinks the risk of higher Aussie unemployment is so high we need to reflect that in returns for govt bonds.

 

[ScottyR]

A lot of rationale being put forward, very interesting.

My take is more simple. The ANZ is a business and therefore is driven to make a return for the shareholder. With aussies paying down credit cards, taking on fewer risks therefore less loans, what else can they do to maintain margin and share price?

And the suggestion of collusions and the others following suit - you can't really sit by and let your competitor make a move that may make their bottom line look better than yours. So they (the other lenders) follow suit to make sure their margins do the same as ANZ. ANZ just bank (no pun I promise ) on the apathy of the majority of customers that wont bother to shop around. So why bother with decent PR.

Maybe there's more to it, lol.