Can you see banks raising interest rates?

[Tehanu]

Some figures explaining how Europe is affecting the cost of borrowings of the banks. Go to this webpage and look at Table 4 and Chart 4.

http://www.aph.gov.au/library/pubs/rp/2008-09/09rp30.htm

Note how since 1980 the financial sector's foreign debt has risen from nothing to 70% of GDP in 2008.

One could say that for decades Australian house prices have been underwritten by foreign debt. Yes, the great housing prices can only go up story has been underwritten by foreign debt. The same debt that the banks are having trouble getting now because of Europe.

For all those who are saying the government should do something about it - the only real option is for the government to take over that $800 billion of debt Australian banks owe to overseas lenders. Things like buying bank securities or back-stopping debt are all lite versions of this with the government crossing its fingers that it will never have to fulfil the backstop.

Of course if the Australian Government had to openly take over the foreign debt - well, that was precisely what broke the Irish government.

You know I wonder if it is far more than $800 billion/70% of GDP now, since this was before the big boom in mortgages that came with the boost to the FHB grant...

 

[Piston Broke]

The banks real assets are not the amount of loans, but the equity that they used to create those loans.

So if they create $100 of loans from equity of $10, then the real ROI is on $10 not $100

Deposits are all guranteed by gov so liabilities are farkall.

Banks are insolvent ponzi schemes.

 

[Dan_p]

wow it works....
anz are smart
raise normal rates
so 1 people start locking into fixed rates
they then lower fixed rates so people move to them and lock in and they lock in a heap of customers
fix customers are going to better variable ones that can move at any time
sounds like a win win for them

This is what I was thinking, it was like a fake play in american league. Perhaps we can expect lower rates in the near future once the masses have locked in

 

[Dan_p]

I have a simple question from a simple person.

If the aus dollar is so high at the moment why is foreign lending so expensive

 

[Rolf Latham]

This is what I was thinking, it was like a fake play in american league. Perhaps we can expect lower rates in the near future once the masses have locked in

there is a little more behind the scenes

while I just sell the stuff and don't price it, most lenders margins on fixed rates are considerably better than they had been on variable rates for quite a while now.

I don't so much that the lender wants to lock clients away with a fixed rate per se, but obviously they need to make money in their mind and if they can manipulate their market in such a way, and their customers swallowed, and are happy with it, because they may not know any better, or it might she suit them, then all power to ANZ.

Meanwhile, thanks to the free advertising ANZ

Thanks

Rolf

 

[Sunfish]

Love reading a thread like this. About banks profits and all, does anybody know if Australian banks here practise any form of fractional reserve banking (or in other terms making money out of thin air)? This practise was/?is rife in the US of A up to the GFC and allowed them to multiply their profits greatly. I heard the ratio used was initially 5:1 which increased to 10:1 just pre-GFC

http://en.wikipedia.org/wiki/Fractional_reserve_banking

Mech, I have been reading/watching stuff on fractional banking for many years and still can't answer that question.

If you listen to the bankers, every dollar they lend is borrowed or sourced from their balance sheet. There is a statuary reserve mandate that says they can't borrow more than ten times their equity. OK, but the concept of fractional reserve banking says that you can lend out multiples of your deposits without borrowing the difference. A lot of shonks do that at the highest levels of banksterism but I just don't believe our retail banks have the option.

 

[Aaron_C]

You have to distinguish between privately created money and government created money.

Government money is the money made by the government - e.g. cash, notes, coins.

Privately created money is the money created by the private banks. In Hong Kong, for example, many of the bank notes are actually created by the two big banks in HK, Standard Chartered and HSBC. More commonly in Australia, private money is on a computer screen (banks 'lend' you money by creating a computer entry). Under the laws, the bank-created money is the same as government money - so you don't notice the difference. The permission given to banks to 'create money' is fractional reserve banking and is the foundation of our current monetary system.

 

[buzzlightyear]

Bendigo Bank raises their SVR by 0.15% to 7.45%

 

[willair]

.

But I'm sure I would be in the very small minority on these forums as I believe that the CBA should never have been sold, and I would personally like to see the gov get back into banking.

Maybe if you would have bought into them over 18 years ago,and rode the wave all the way up till today you would think different,.
.
I would also like to see this Government go into Banking,the only problem would be is within six month they would all be in the slammer
for not keeping their word..

 

[buzzlightyear]

CBA increases SVR 0.10% to 7.41%

 

[Jake D]

CBA increases SVR 0.10% to 7.41%

Source...?

 

[Aaron_C]

Source...?

http://www.theage.com.au/business/cba-bendigo-join-banks-in-lifting-rates-20120213-1t1ae.html

 

[Jake D]

Bugger. Was really hoping they'd stay down.

 

[Aaron Sice]

This is what I was thinking, it was like a fake play in american league. Perhaps we can expect lower rates in the near future once the masses have locked in

your cynicism never ceases to inspire me.

it also never seems to be completely wrong, either....

 

[Dan_p]

your cynicism never ceases to inspire me.

it also never seems to be completely wrong, either....

In person I am very optimisitic. I don't mind a good conspiracy.

 

[buzzlightyear]

no but borrowers did get discounts to the 'standard variable rate'.
How many borrowers got a discount 15 years ago,
How many borrowers got a discount now?

Consider also the proliferation of the mortgage broker industry over the last 15 years. They also got their cut.

Is this the same way retailers saying you are having an 80% off sale? But off what original price?

I just don't believe the headline SVR today is the same as it was 15 years ago.

You maybe right IV, but I am now far too cyncial about the spin by the banks.

I would also argue that the broker channel could well be a far cheaper one than the ones underpinned by bricks and mortar.

 

[MikeR]

How much have the NAB wasted on their "Breaking up with the other banks" campaign now that they have re-joined the other 3 with today's increase.

 

[dredfern]

Assuming the banks are telling the truth that they have been forced to raise rates because the cost of funding has increased recently, shouldn't we assume by their logic that they will lower rates again as soon as the cost of funding returns to more normal long term levels?

 

[Aaron_C]

Assuming the banks are telling the truth that they have been forced to raise rates because the cost of funding has increased recently, shouldn't we assume by their logic that they will lower rates again as soon as the cost of funding returns to more normal long term levels?

Nope. As a business why would you reduce the prices of your products if the customer is already buying them? Only with increased competition.

 

[Peter 14.7]

no but borrowers did get discounts to the 'standard variable rate'.
How many borrowers got a discount 15 years ago,
How many borrowers got a discount now?

Consider also the proliferation of the mortgage broker industry over the last 15 years. They also got their cut.

That true. The advertised rate is irrelevant today unlike when it was 15 years ago.

The fact is Loans are like Cars or worst Hotels. There is RRP or rack rate which is there to a) offer a (fake) discount and b) those unable or too tired or too inexperienced to negotiate a deal.

Thus Loans for Average punters or mum and dad PPOR owners pay market less a little, poor credit pay market and most here get 0.7 to 1% off.

Case in point I am staying in a 4 start SYD CBD Hotel for $150 bought mystery on WOTIF. Same Hotel on discount via tier own site is $199. Tomorrow being Valentines is sold out so rack of $299 or so would apply.

Loans are commodities.

Peter