there was no need to, there was no GFC, there was a degree of competition which was improving and the RMBS market was alive and well.
Interest Rates are set by the Reserve Bank
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there was no need to, there was no GFC, there was a degree of competition which was improving and the RMBS market was alive and well.
Yes exactly, there is more than one side to the story.
I don't think there are many other sides to the story as the banks haven't passed increases on to depositors (according to what i read the other day at least). The burden of excessive IRs on the economy will impact them more so, because no man is an island
Hi Sunfish,
I'm not quite sure I know what your saying. Maybe you thought I was unhappy about the reserve bank, and what they were doing? That's not the case at all. I'm just pointing out that all this bluster about how much the banks are gouging us is complete nonsense. If CBA hadn't put their extra on cup day, you would have been paying it anyway after the December meeting.
The Reserve Bank wants mortgage interest rates at a certain level. If the cash rate was 2.5% and the mortgage rate was 7.1%, then they would have accomplished what they set out to do. At the moment it is 4.75% and 7.1%. That's where they want it.
I'm not backing the banks, I'm not saying what rate rises they should have had, all I am saying is that if they all dropped their rates 1% tomorrow, the reserve bank would increase it's cash rate to get the mortgage interest rate back to where they want it. If the banks increase too much over what the reserve does, the reserve will drop their rates, and if the banks don't follow suit, then there will be a fight.
If anything over the last 18 months or so, the depositors have had a much better run with regards to rates, due to competition for their money. Best of luck to them, happy for that. The reserve (and the media, and the politicians it seems) don't care about them, so good luck to them if the current situation is helping them out.
I'm not saying I'm unhappy with the rate rises, I couldn't care less what the interest rate is (to a point
but if CBA and the rest only went .25 on cup day, then the reserve would have gone again in December anyway, and you'd all be paying the rate anyway.And that's my point: What the banks do is almost irrelevant, the rate for 95% of borrowers is decided on the first Tuesday of the month, every month except January.
Ausprop
Not specifically this time, but deposit rates are well up on where they were pre-crisis. This is now considered a cheap alternative to the international market.
Right now you can get rates at 6.5% on deposit, and with the real mortgage rate people pay looking like being somewhere around 7.1%, this is a pretty good deposit rate.
In most states,disc of comms has been law for most loans.
Legislation demands that we show clients upfronts and trails at actual for all lenders on our panels
Works quite well for us actually.
Had a potential client go into "witness protection programme" mode this week when we asked for an additional up front fee on the weeny loan to simply cover costs
ta
rolf
There may be some similarities between the Fed and RBA, but I would suggest the biggest glaring difference is that the Federal Reserve System is made up of for-profit private banks...would you prefer a central bank to socialise profits or have the profits distributed to private owners? What is your suggested alternative? Perhaps any profits could go to charity...
I think it's important that the RBA is a standalone entity, can you just imagine the RBA being run by the clowns in parliament? How else would you suggest it be run? Public ballot for any decisions?
The RBA is far from perfect, but given the monetary system they have to work with I think they do a reasonable job.
the RBA should be a not-for-profit organisation if it has control of the money supply.
So if they make unintentional profit via a particular currency transaction they would just keep that on their own books?
well, that would be profit, wouldn't it? although they can literally just "make" a profit any way they want.
iIMO, it's a conflict of interest for the independant body controlling the money supply in Australia to be speculating on it as well.
Right now there's a drying up of liquidity as a lot of capital has been sucked up by bailouts. A$ and A$ assets are considered high-risk and most offshore lenders will require a high margin to compensate for that. I've been dealing with CBD developments that are going haywye and it's not even an issue of how much interest you want to pay, the banks won't even lend to you in the first place. Debt markets are dried up and retail investors and instos are also not willing to go into notes, bonds or convertibles. Someone I know just took out mezzanine debt at 20% interest rates for a Melbourne CBD development.
Also the A$ is at historical heights, lending into it would mean you'd need to hedge against it. Since A$ is considered a high-risk currency that is easily manipulated by funds and because it's at historical heights, the bps associated with the hedging costs would be high. Even if CBA borrowed in US$ at say 4%, they'd have to take out an expensive hedge since they need to repay the US lenders and the risk of the A$ is to the downside. This cost is naturally passed on to the investors. Can't you see that ROE of the banks is sub 20% at the moment and the margins are actually not as profitable as US banks?
As usual, mum and dad investors need to quit being so naive and get off their mum and dad @$$ to try and understand what's really happenning in the world, rather than citing some media or Joe Hockey rhetoric. But then again that's why they're mum and dad investors. I don't even know why I bother.
Also the A$ is at historical heights, lending into it would mean you'd need to hedge against it. Since A$ is considered a high-risk currency that is easily manipulated by funds and because it's at historical heights, the bps associated with the hedging costs would be high. Even if CBA borrowed in US$ at say 4%, they'd have to take out an expensive hedge since they need to repay the US lenders and the risk of the A$ is to the downside. This cost is naturally passed on to the investors. Can't you see that ROE of the banks is sub 20% at the moment and the margins are actually not as profitable as US banks?
As usual, mum and dad investors need to quit being so naive and get off their mum and dad @$$ to try and understand what's really happenning in the world, rather than citing some media or Joe Hockey rhetoric. But then again that's why they're mum and dad investors. I don't even know why I bother.
Well partially correct....
Bear also in mind...that there is a large amount of deposits which the banks also lend out. Don't know the exact figures but in some institutions (i.e. credit unions) this represents something 60% of overall lending origination.
I would envisage the larger banks would not be that different...even if only 30-40% of lending it is still substantial.
This is also why people like the CBA tier their customers....and probably why some customers get preferential treatment as they can lend their deposit base funds to these customers.
Bear also in mind...that there is a large amount of deposits which the banks also lend out. Don't know the exact figures but in some institutions (i.e. credit unions) this represents something 60% of overall lending origination.
I would envisage the larger banks would not be that different...even if only 30-40% of lending it is still substantial.
This is also why people like the CBA tier their customers....and probably why some customers get preferential treatment as they can lend their deposit base funds to these customers.
costs of hedging currency?
I'm really not getting the angle you're working here.
Are you suggesting the AUD buying at 60c was speculating on the currency movements rather than working to stabilise the significant fall it saw at the time?
RBA policy is no secret, it's on their website
http://www.rba.gov.au/mkt-operations/about-mkt-operations.html
they can advertise it all they like - it's no secret that they do play teh market.
i still say it's a conflict of interest. essentially they're paid to speculate and control, along the same path as a CEO buying stock before a big announcement - it's pretty much insider trading.
they buy the market to prop it up and short the market to cool it down.
imagine if the CEO of BHP did this with autonomy and unregulated abandon?
i still say it's a conflict of interest. essentially they're paid to speculate and control, along the same path as a CEO buying stock before a big announcement - it's pretty much insider trading.
they buy the market to prop it up and short the market to cool it down.
imagine if the CEO of BHP did this with autonomy and unregulated abandon?
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That is an interesting take. When the reserve bank is the one pulling the levers how can they also be able to trade in the currency.
As hobo points out the intention is meant to be to stop the currency fluctuating wildly so people can have the confidence to trade in AUD without it going to the moon and back overnight etc as we are a small volume currency so prone to sudden movements.
What is more concerning for me after watching business sunday it had the chairman of blue scope on who also sits on the board of the RBA. How can you be directing a company and at the same time have the countries best interests at heart? This for me is a very important question that I suspect people are going to be asking as IR's continue to rise.
That said a director of a company would presumably want permanently low interest rates and accept a level of inflation. Though as he pointed out a high local currency does not hurt them as much as others due to their overseas lines.
