It seems this thread could start looking dated soon..... I just heard that ANZ plan to LIFT INTEREST Rates on Friday and most other banks will follow ....
Did you? Did you really?
Where did you hear this?
Interest Rates to Drop?
- Thread starter HomeBuyAU
- Start date
Did you? Did you really?
Where did you hear this?
It seems this thread could start looking dated soon..... I just heard that ANZ plan to LIFT INTEREST Rates on Friday and most other banks will follow ....
Oh dam it!! What does this mean for the 2 year ANZ 5.8% Fixed rate?? I wanted to lock it in a couple of weeks ago but MB recommended I wait till Februarys RBA decision! I hope they are still offering it
Should still be available judging by their site:
http://www.anz.com/aus/RateFee/InterestRates/Rates.asp
It seems this thread could start looking dated soon..... I just heard that ANZ plan to LIFT INTEREST Rates on Friday and most other banks will follow ....
There was a report from UBS that new mortages aren't profitable for banks at the moment.
If you look at the Big 4 their Net Interest Margin hovers at around 2.2%...this is the difference between that they charge their loan customers and what they pay their depositors. This 2.2% has to pay for all their expenses and maintain a profit. Right now they are offering mortgages at around 6.50%, and paying depositors around 5%....the 1.50% NIM means a 0.7% shortfall which has to be funded somewhere else.
Why? As a self funded retiree I approve. I am entitled to a fair price if I lend money to you to speculate with.
You have no choice but to get used to the high dollar. It is NOT in a bubble. In '04 [I think] I predicted parity with the USD [here]. It has happened and it has happened for good reason. There is no reason to expect the trend to reverse.
Oddly, the A$ is more correlated with the gold price than that of iron and coal. Buying gold with our dollars will not be super lucrative but it will perform better than assets denominated in most other currencies, including the Loony. A stock I own listed on the TSX has cost me 33% loss in forex. What was once a great buy is again a bit ordinary.
Will property denominated in A$s perform well too? Maybe, but being conservative I'm unwilling to test that idea.
Back in January 2011 I predicted:
http://www.somersoft.com/forums/showthread.php?p=755274&highlight=interest+rates#post755274
The reason why I added the last bit is because we are now in a world where central banks are losing control of interest rates. It was obvious back then as it is now. And it's not just Australia. So I am not at all surprised that the banks are talking about increasing interest rates on their own. Basically this is the world we live in now and the prudent investor needs to plan for the fact that the cost of credit will increase independent of anything central banks can do - even the QE shenanagans, LTRO's and various other acronyms will probably only be able to hold rates down temporarily because it is a solvency issue, not a liquidity one. It will be ironic though if speculators start attacking central banks and bring down countries with the excess liquidity the central banks are shovelling into the system...
As for the complaining about the banks increasing on their own - if they don't they are likely to ration credit instead. This happens all the time when countries try to fix prices. If the seller can't sell it at a price that will recoup their costs they will not sell it.
So either mortgage holders bite the bullet and take the extra payments or watch their asset prices go down even further because potential buyers can't get mortgages. Of course asset prices will probably go down more with the extra costs as well.
Actually, up to now, mortgage holders have been protected from the full cost of credit at the expense of business borrowers because they a politically protected class while no-one cares about small businesses (until the unemployment rate goes up I guess).
You know we wouldn't have this problem if we weren't such poor savers that the banks have to raise a substantial portion of their funding on overseas wholesale markets...This wasn't always the case you know. In fact something like that is considered downright dangerous and risky for banks, especially after all the banking crises developing nations (and even developed nations actually) have had for exactly this reason. Someone has been asleep at the wheel...
http://www.somersoft.com/forums/showthread.php?p=755274&highlight=interest+rates#post755274
The reason why I added the last bit is because we are now in a world where central banks are losing control of interest rates. It was obvious back then as it is now. And it's not just Australia. So I am not at all surprised that the banks are talking about increasing interest rates on their own. Basically this is the world we live in now and the prudent investor needs to plan for the fact that the cost of credit will increase independent of anything central banks can do - even the QE shenanagans, LTRO's and various other acronyms will probably only be able to hold rates down temporarily because it is a solvency issue, not a liquidity one. It will be ironic though if speculators start attacking central banks and bring down countries with the excess liquidity the central banks are shovelling into the system...
As for the complaining about the banks increasing on their own - if they don't they are likely to ration credit instead. This happens all the time when countries try to fix prices. If the seller can't sell it at a price that will recoup their costs they will not sell it.
So either mortgage holders bite the bullet and take the extra payments or watch their asset prices go down even further because potential buyers can't get mortgages. Of course asset prices will probably go down more with the extra costs as well.
Actually, up to now, mortgage holders have been protected from the full cost of credit at the expense of business borrowers because they a politically protected class while no-one cares about small businesses (until the unemployment rate goes up I guess).
You know we wouldn't have this problem if we weren't such poor savers that the banks have to raise a substantial portion of their funding on overseas wholesale markets...This wasn't always the case you know. In fact something like that is considered downright dangerous and risky for banks, especially after all the banking crises developing nations (and even developed nations actually) have had for exactly this reason. Someone has been asleep at the wheel...
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Yes, sometimes people forget that the 15% interest rates of the eighties didn't come about because the RBa was just trying to have a bit of fun with borrowers.
There is no reason this can't happen again.
There is no reason this can't happen again.
Aaron, his tongue is stuck firmly in his cheek. [I hope].
The Big Mac Index' would suggest otherwise. On fundamentals the AU$ should definately be trading significantly higher than back in 04, but not at these levels.
By the way the two year forward result based on a Big Mac Index for Australia in a particular year has shown a surprisingly good correlation. (ie check the Big Mac index for a particular year, notice over/under 'valuation', fast forward two years and see the movement in the currency.
In 2004, the Big Mac Index was showing Australia 20% undervalued, by 2011 its showing near a 20% over valuation. Lets see where the AU$ is in 2013
I'm old enough to remember those times double-digit inflation and rampant wages growth look pretty remote right now.
But we have to remember back in those days that was the recession we had to have
ta
rolf
I'm thinking that the Australian borrowers should spare a thought for the Irish variable interest rate borrowers - the Irish banks' cost of borrowing money keeps on going up out of the control the ECB but they have lots of borrowers on trackers (ECB + fixed margin). So they have to keep variable rates high, not only to cover the cost of borrowing money for the variable rate loans but for the tracker mortgages. Irish banks are desperate to kick people off trackers.
Even the all-powerful Fed is losing control. Central banks can traditionally only control short-term rates. The longer-term rates can only be handled by "unconventional" methods like QE and Operation Twist. However as Bill Gross has warned, if the Fed succeeds in keeping interest rates low it could destroy the quantity of credit created:
http://www.ft.com/intl/cms/s/0/04868cd6-d7b2-11e0-a06b-00144feabdc0.html
Basically unintended consequences and all that. The central banks are not in control. And I think as time goes on, they will continue to lose more control.
Even the all-powerful Fed is losing control. Central banks can traditionally only control short-term rates. The longer-term rates can only be handled by "unconventional" methods like QE and Operation Twist. However as Bill Gross has warned, if the Fed succeeds in keeping interest rates low it could destroy the quantity of credit created:
http://www.ft.com/intl/cms/s/0/04868cd6-d7b2-11e0-a06b-00144feabdc0.html
Basically unintended consequences and all that. The central banks are not in control. And I think as time goes on, they will continue to lose more control.
You're welcome to trade that index but I will stick with fundamentals. In spite of the worst of Julia's efforts the A$ is the best house in a lousy street.The Big Mac Index' would suggest otherwise. On fundamentals the AU$ should definately be trading significantly higher than back in 04, but not at these levels.
By the way the two year forward result based on a Big Mac Index for Australia in a particular year has shown a surprisingly good correlation. (ie check the Big Mac index for a particular year, notice over/under 'valuation', fast forward two years and see the movement in the currency.
In 2004, the Big Mac Index was showing Australia 20% undervalued, by 2011 its showing near a 20% over valuation. Lets see where the AU$ is in 2013
You are becoming very predictable Tom.
too much hurt in the economy to keep rates steady. I don't think anyone expected the resources boom to crowd out the other industries to the extent it has. The RBA is cognitive of this but doesn't appreciate it on a street level. It seems it doesn't really matter what industry you have when you have a nearly full employment educated populice. The RBA should back off a little until the boom grips a bit better... but I acknowledge that they can;t jump around all over the place. If anything we should take confidence in this action - its seems they are still bracing for the full effects of the resources investment. I just hope the rust belt can recover once the dust settles. Even financials as much as I despise the leaches! Yes it is a major structural shift but we wanted resources as a bolt on not an alternative
Trackers rock. I still have a property in the UK on a HSBC lifetime tracker set at 0.8% above BOE base rate. That's a whopping 1.3% interest pa!
Suffice to say its cash flow positive.
Hmmmm, perhaps Australia should look at some sort of overage system whereby the miners pay the citizens of Australia a kind of "profit rent" in boom times. That way there could be a reallocation of super profits from the few to the many and ensure industries affected by factors such as a high exchange rate caused by this boom receive support to protect jobs long term. That way, perhaps we won't all have to move to Perth (god forbid) and we'll still have something left in 20 years time other than large holes in the desert.
But wait - hasn't someone has already proposed such a scheme.
Seriously, why would you vote for Abbott? The only issue with the MRRT is that it doesn't go far enough and Gillard dropped her knickers to gain breathing space when she knifed Rudd.
