Can you see banks raising interest rates?

[dredfern]

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

My point exactly. If they had of just said 'we're upping rates because we can and we want to maximise our profits' then so be it. But they've gone to so much effort to make us believe that its due to the rising cost of funding (which I assume is temporary),

If they want us to believe anything they say I think we should all expect they should reverse these raises when things are normal again.
But ffcourse they won't reverse these increases, because they don't have to and they want to maximise their profits.

They should have just say so to begin with otherwise it will be pretty clear when they don't reverse them!

 

[Peter 14.7]

Back on topic: In the end the RBA has stuffed up.

Back on topic: In the end the RBA has stuffed up.

Like a school teacher who threatens a rowdy bunch of bullies, once the bullies works out Teacher only has threats, you have no authority. Bullies rule.

If RBA had dropped 0.25% then Banks would have taken half but still dropped say 0.1%. Media would squeal. Pollies would lament and threaten. BUT RBA would still look to be in control of the class.

Now Banks has said we all moved up and where are your all powerful Pollies to protect you? Gillard simply says "go elsewhere" but where? as above, the Bullies are in charge now.

Effectively the Banks can now milk us ALL knowing that as group they do what they want. The RBA will be forced to drop rates in March simply to replace the status quo of a few days ago. Which then tells overseas the RBA has "blanks in the gun" when it comes to controlling the Australian economy.

IMO this development has far greater implications for property than anything over the last 10 years. It could well end the steady rise in price, and cause a overseas style drop.

Think about it, unemployment rising AND rates rising? But rents will drop as those renting have no money. Retail is only more stuffed and will move to internet with more job losses. Less demand equals less supply pressures. Spiral of job losses leads to job losses. RBA drops rates and nothing happens!!! Gov stimulus but the piggy bank is bare!!!

I would not like to holding middle class and upper end IP at this time. Bottom will be insulated by welfare payments. Unless we go the way of Greece!

Back on topic: In the end the RBA has stuffed up.

RBA MUST DROP rates not 0.25% but 0.5% in March or all control will be lost.
POLLIES must publicly punish the Banks but in reality it will be PR

Interesting times. For the first time in 15 years I am feeling nervous about my property exposure.

Peter 14.7

 

[Rolf Latham]

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?

Despite all the talk of "lack of competition" and rumours of collusion amongst our big 4 that now control more than 80 % of the market, I truly believe there is still sufficient market force to hold them accountable as long as borrowers are willing to make it so.

ta

rolf

 

[Rolf Latham]

Back on topic: In the end the RBA has stuffed up.

Like a school teacher who threatens a rowdy bunch of bullies, once the bullies works out Teacher only has threats, you have no authority. Bullies rule.

If RBA had dropped 0.25% then Banks would have taken half but still dropped say 0.1%. Media would squeal. Pollies would lament and threaten. BUT RBA would still look to be in control of the class.

Now Banks has said we all moved up and where are your all powerful Pollies to protect you? Gillard simply says "go elsewhere" but where? as above, the Bullies are in charge now.

Effectively the Banks can now milk us ALL knowing that as group they do what they want. The RBA will be forced to drop rates in March simply to replace the status quo of a few days ago. Which then tells overseas the RBA has "blanks in the gun" when it comes to controlling the Australian economy.

IMO this development has far greater implications for property than anything over the last 10 years. It could well end the steady rise in price, and cause a overseas style drop.

Think about it, unemployment rising AND rates rising? But rents will drop as those renting have no money. Retail is only more stuffed and will move to internet with more job losses. Less demand equals less supply pressures. Spiral of job losses leads to job losses. RBA drops rates and nothing happens!!! Gov stimulus but the piggy bank is bare!!!

I would not like to holding middle class and upper end IP at this time. Bottom will be insulated by welfare payments. Unless we go the way of Greece!

Back on topic: In the end the RBA has stuffed up.

RBA MUST DROP rates not 0.25% but 0.5% in March or all control will be lost.
POLLIES must publicly punish the Banks but in reality it will be PR

Interesting times. For the first time in 15 years I am feeling nervous about my property exposure.

Peter 14.7

Its a spin doctor exercise by the lenders: ), and its a good thing that the lenders are independent of the RBA, and the RBA is independent of Gov of the day ( in theory at least)

While I have rarely agreed with RBA policy, im not on their board, and they have their logic for doing what they do ( or DONT do), which goes way over my head.

Swany will be swanning to tell borrowers to "vote with your feet, move lenders if u arent happy".

That CLEARLY ( CRYSTAL CLEAR) shows me how disconnected the Gov is from the real world.......................

The borrowers MOST affected by upward rate moevements are those that have the LEAST capacity to move due to LMI or vals issues.

I oftenhave to ask, is Ronald Mc Donald advising the financial arm of our gov , or is it some less commercial clown ?

ta
rolf

 

[Peter 14.7]

As proof of what I just wrote

http://www.smh.com.au/national/big-...costs-as-banks-lift-rates-20120213-1t2ar.html

The big four and now Adelaide and Bendigo has raised.

Who else do you go to?

Aussie is advertising the old "see us and get the tricks" but they are owned by NAB, Wizard by another.

And Labour Treasurer Swan is saying "go down the road and get a better deal"

It all reminds me on Rocky III Movie when in the second fight Clubber Lang (Swan) is punching Rocky (Banks) with no effect, and an exhausted Lang looks up and Rocky says "you got nuthin".

Peter 14.7

 

[Aaron_C]

I oftenhave to ask, is Ronald Mc Donald advising the financial arm of our gov , or is it some less commercial clown ?

What do you expect from career politicians running this country...

 

[Rolf Latham]

What do you expect from career politicians running this country...

Leadership ?

Guts to go it alone ? Stuff what the media and polls say ?

Whether they have it right or wrong.........................because often history has often shown that politically "wrong" has an interesting habit of morphing to "right" over time.


ta

rolf

 

[Peter 14.7]

That CLEARLY ( CRYSTAL CLEAR) shows me how disconnected the Gov is from the real world.......................

The borrowers MOST affected by upward rate moevements are those that have the LEAST capacity to move due to LMI or vals issues.

I oftenhave to ask, is Ronald Mc Donald advising the financial arm of our gov , or is it some less commercial clown ?

ta
rolf

LOL

Ronald knows how to make a buck.

We have the Whitlam Gov mark 2 in charge. We can only hope and pray they last no more than this term.

Agree with Aaron_C when career pollies and career pollie minders make the decisions we are stuffed. The Libs are only better because their vested interests are business. Labour vested interests is the Unions which in their defense seem to be siding with the Opposition more and more.

Alcoa is NOT closing down because of the carbon tax, pull the other one.

Peter 14.7

 

[Peter 14.7]

Leadership ?

Guts to go it alone ? Stuff what the media and polls say ?



ta

rolf

We (Australia as whole) brought this on. We put a weak government in, with no power in the Senate to make any decision with leftish, green, radical interests having a say on macro economic policy based on how many Koalas will be woken from thier daily sleep.

If the Libs get in and Greens are still in the Senate we will still be stuffed.

I endorse democracy but what we have is not working. One house.

Peter

 

[Rolf Latham]

We (Australia as whole) brought this on. We put a weak government in, with no power in the Senate to make any decision with leftish, green, radical interests having a say on macro economic policy based on how many Koalas will be woken from thier daily sleep.

If the Libs get in and Greens are still in the Senate we will still be stuffed.

I endorse democracy but what we have is not working. One house.

Peter

tis not very different to an SME where 2 stakeholders have the same 50 % shareholding..........little moves fwd .

Thats why I often suggest one party have the controlling interest and if the minority party isnt prepared to do that, the biz is often doomed from the start, since then its not about the business, but individual ego.

ta'rolf




t
arolf

 

[Sunfish]

Despite all the talk of "lack of competition" and rumours of collusion amongst our big 4 that now control more than 80 % of the market, I truly believe there is still sufficient market force to hold them accountable as long as borrowers are willing to make it so.

ta

rolf

I'm no apologist for the banks, but I do not believe "collusion". Better to be found guilty of murder.

But like experienced road racers they know to take turns leading the pack. They didn't have to ring around to decide who would be the first to move rates up. ANZ saw a chance, knowing the others would follow. This is why the Gov's advice to change banks is a hollow threat. No bank will be left like a shag on a rock nor any other left with a distinct advantage, for long.

 

[Peter 14.7]

Competitors will be great but will not set up the same structures.

Off topic but at risk of being condemned.

We are harsh on the Banks. I say this as how many of us high net worth individual actually go in the Bank any more?

Me, I use a CBA appointed customer person. We use cards not cash, We bank all on the Net and we only go to our excellent locla branch for the occasional form or deposit a cheque. Even the new loans are all via telephone and fax. Just got another $100k and never saw my rep!

When competitors like U Bank don't have these costs and we demand the best rates do we really wonder why the Banks are cutting staff.

The Gov should convert all Aus Posts to mini banks for pensions, welfare, etc.. those who use the banks. Put secure ATMS in each one to remove the robbery risk and secure deposit boxes for the same.

Let the loan banks compete free and fair.

An idea? Peter

 

[Aaron_C]

Well let's not forget that banks, despite their name, are not in the sole business of lending money out. These days they have significant wealth management arms, insurance etc so that is where all the overheads are coming from. The lending area is just getting smaller and smaller.

 

[Sunfish]

All you brokers must take a little comfort from this. With the banks continually cutting staff I see them relying on you more than ever. I could see them setting up preferred brokers [the way car insurers have preferred repairers] with strict guidelines so that your grading is accepted and the apps are virtually rubber stamped when the bank receives them. I guess you could demand more comm for this too.

Edit: You wouldn't need to be too good to be better than their in-house people with the paperwork. Everything seems to be new and complex for them, even when it isn't.

 

[Token Funder]

Far be it from me to talk up the competition, but I think Mike Hirst's article in the SMH is one of the better I've seen on the whole shebang:


ALL those contributing to the current mania around increasing mortgage rates would benefit from a history lesson.

Until the early 1980s, banks in Australia operated in an environment subject to government-imposed interest rates. This regulation, unfortunately, often had the impact of restricting credit, stifling the growth of banks and the economy, and preventing innovation that could assist consumers and business.

To its credit, the Hawke-Keating government adopted a floating exchange rate, the entrance of foreign banks and the dismantling of regulated interest rates. The results of deregulation have benefited the community. Australia has a banking system that is safe, sophisticated and convenient. If one uses interest margins earned by banks as a proxy for cost, there has been improvement. In 1980, the average interest margin earned by banks was 5 per cent, today it sits around 2.2 per cent.

Advertisement: Story continues below Fees have increased, but so have the number of services that banks offer, with the exception of banking for rural and regional communities. If deregulation has delivered all that, why are many voices railing against one of its core tenets - allowing banks to set interest rates on loans? To some degree it is an accident of history driven by the emergence of the securitisation market and non-bank providers of home loans. Because these providers were free of the cross-subsidisation that banks had embedded in their businesses, they could charge a lower margin. Banks were forced to drop loan rates to meet this challenge.

Additionally, the bonds issued by non-bank lenders priced at a margin (or risk premium) above the 30-day bank bill rate. That risk premium was around 30 basis points so their funding rate was never going to be very different from the RBA official cash rate. Subsequently, the market moved to changing home loan rates as the RBA rate changed and a false nexus was established between cash and home loan rates.

Liquidity is the key to the solvency of any organisation that lends. To ensure liquidity, an organisation must have more assets (loans and investments) available for sale than it has liabilities (wholesale bonds and deposits) maturing. Banks deal with this by holding liquidity portfolios and operating funding programs that see liabilities maturing over long timeframes.

The latter point means that the cost of funds for banks is different to the RBA cash rate. This is true for two reasons:

■The natural structure of interest rates in a growing economy means risk-free rates are higher for longer maturities.

■Depositors and bond holders require a higher risk premium the longer the term of their investment.

For my bank, the premium we pay to raise term deposits has gone from about 0.5 per cent below the bank bill rate pre-GFC to as much as 1.3 per cent above today. We have already told the market that our first-half profit for this year will be flat as a result. A bank's role can be distilled down to standing between those who have more money than opportunities to invest, and those with more opportunity than money. Banks take on the credit risk of the borrower and manage the maturity mismatch between investors and borrowers.

To do this, banks require capital and, to get capital, banks must be profitable. With housing loan rates priced where they were before last Friday, banks were making no money from those loans, bringing into question the sustainability of the role. Banks faced a choice: increase rates or stop lending, and the second option would be far worse for all.

Rates have been increased - ours by 15 basis points - to reflect the true cost of funds for banks. It makes sense for the banks, for their stakeholders (customers, partners, staff and shareholders) but, most importantly, it makes sense for the economy as a whole. Underpricing risk was the principal cause of the GFC and the effects of that, as seen in countries with weak banking systems, are dire.

So why the outcry? Everyone can understand why borrowers are upset, and fair enough. They now must pay a little extra - but, in the main, they are still being charged less than when they took their loan out. And the media? I am seeing a little more balance in their reporting, led by those journalists who understand what makes economies strong.

There are, of course, the usual emotive commentaries on all this. It needs to be more balanced in my view. And finally, what about politicians? They are all well educated, and smart enough to understand the veracity of what I have outlined. Understandably, though, they see no votes in supporting increases in the home loan rates of their constituents. Their depositor and superannuant electors would have a different view I'm guessing.

 

[simo74]

All you brokers must take a little comfort from this. With the banks continually cutting staff I see them relying on you more than ever. I could see them setting up preferred brokers [the way car insurers have preferred repairers] with strict guidelines so that your grading is accepted and the apps are virtually rubber stamped when the bank receives them. I guess you could demand more comm for this too.

Edit: You wouldn't need to be too good to be better than their in-house people with the paperwork. Everything seems to be new and complex for them, even when it isn't.

The facts are that banks are not continually cutting staff. i think you will find that Banks employ more people than they did 5 to 10 years ago. You only ever hear when banks are firing not hiring.

 

[Sunfish]

The facts are that banks are not continually cutting staff. i think you will find that Banks employ more people than they did 5 to 10 years ago. You only ever hear when banks are firing not hiring.

Not at the coal face they ain't.

 

[Peter 14.7]

All you brokers must take a little comfort from this. With the banks continually cutting staff I see them relying on you more than ever. I could see them setting up preferred brokers [the way car insurers have preferred repairers] with strict guidelines so that your grading is accepted and the apps are virtually rubber stamped when the bank receives them. I guess you could demand more comm for this too.

Edit: You wouldn't need to be too good to be better than their in-house people with the paperwork. Everything seems to be new and complex for them, even when it isn't.

CBA already do this. They have "CBA Innovations" essentially CBA only brokers. Independent businesses but only sell CBA. Innovative, fast and less, less paperwork. I use one in Chatswood NSW and now Bendigo VIC with great success.

Peter

 

[Aaron_C]

CBA already do this. They have "CBA Innovations" essentially CBA only brokers. Independent businesses but only sell CBA. Innovative, fast and less, less paperwork. I use one in Chatswood NSW and now Bendigo VIC with great success.

Peter

They're basically employees by any other name.

 

[Nathan]

FYI,

Firstly I didn't read the thread it may have been touched on..

But there is a lot of debt rolling over over the next 6 months as its fixed for a set time period to the banks. This was done in the previous GFC and with uncertainty there is high chance these new terms of rolling the debt in will be higher. It has no bearing on the RBA decision to lower rates.

With saying this, a personal view point is RBA will reduce rates by another 50 - 100bp in this period of lowering rates.

Nathan.

p.s. no advice here, do your own research and due diligence as per usual and consult with your own team of experts.