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Hey buddy, enough with the relevant information already.
Australian borrowers are in the midst of receiving a materially larger reduction in their costs of borrowing than they thought they would get a week ago.
And rates are now well below the long term average.
And the economy is the envy of the industrialized world.
It's a freakin' outrage and we're all entitled to be mad as hell
That's right: We need people to swallow the banks' financial declarations whole, not question whether they are being fed complete fairy floss in the biannual financial statements as well!Hey buddy, enough with the relevant information already.
That's right. They should feel damned lucky the banks are letting them have any of the May reduction.Australian borrowers are in the midst of receiving a materially larger reduction in their costs of borrowing than they thought they would get a week ago.
Well, if you don't count the roughly 25 basis points the banks just filched. Otherwise, rates look about one standard cut below the average, don't they? Which is too good for these plebs anyway!And rates are now well below the long term average.
Although, given the state of the rest of the industrialised world, that's actually not saying a heck of a lot. Lucky Canada's a frozenassed place though, eh?And the economy is the envy of the industrialized world.
Right! Although prospectively less mad if the banks would release their funding costs to the RBA monthly so that the public could be confident SVRs will actually drop when funding costs do.It's a freakin' outrage and we're all entitled to be mad as hell.
Only 2.17% NET interest margin hey? Poor things, you gotta feel for them!
How does this compare to overseas banks?
Only 2.17% NET interest margin hey? Poor things, you gotta feel for them!
And each basis point reduction in net margins takes the multi-billion dollar bank one step closer to catastrophic loses.
Dunno, but I suspect that's a very long answer. "Overseas" is a big place you see - it might help if you were a little more specific...
Let's see...To be earning $2.17 on every $100 loan they make, all well knowing inspite of all the checks done that are economically viable on the creditworthiness of the borrower and valuation on the tangible assets. The borrower could end up defaulting or the value of the asset drops 30%. The worst situation would be both happening. Look at USA.
So a transaction that was going to produce a profit of $2.17 suddenly has resulted in a loss of around $35 ($30 capital loss + $5 costs to fire sell).
In order for the bank to now break even and earn the $35 it needs to make loans of $1600. 16 times the original loan amount! and hope and pray none of them default and/or value of the asset drops.
Each basis point increase is like gold for the bank. And each basis point reduction in net margins takes the multi-billion dollar bank one step closer to catastrophic loses.
Cheers
Oracle.
SVR reduces to 7.04%.
Hi buzz,
Where'd you get your info from re BOM reduction?
According to twitter - 'offers Victorians a better deal by decreasing our standard variable home loan rate by 0.41% to 6.99% Effective from 14/5/2012'
Mistyped apologies, it is 6.99%..
Funny how there's no announcement on their website, have to resort to twitter..
Oracle, your example is a bit off base IMO. Your capital loss of 30% doesn't include loss of the investor's equity, which accounts for the first 20% for resi properties, either through the original LVR or the LMI policy. The remaining 10% would be the bank's problem so you might want to re-do your numbers on that basis.
Let's not forget that when it all hits the fan like this, the govt just steps in and guarantees the debt anyway, as we have seen very recently, so it's not exactly armageddon for the bank while the govt retains a decent balance sheet at least. And let's not forget as well that it's not the bank's money they're lending...
BTW, despite my flippant remarks in this thread to date, I actually like our banking policy. We have strong banks, demonstrated ability to ride through the GFC, some competition at least and reasonable regulation and capital adequacy. Of course if it all hits the fan in asset markets govt has to step in but this happens in every country and you can't run a bank thinking the market is just around the corner from collapsing 50% every minute. A balance is required or nobody would ever lend anything.
On that note, does anyone know what has happened, if anything, to margin loan interest rates?
Well the SVR is one thing - I am awaiting an update on how their discounts are going to be like as BoM has been very aggressive lately with their loan discounting.
I have one basic home loan with them after they changed from St George in Vic. My assumption is this rate will go down the same amount as their SVR announcement? If not any idea when and where they'll announce decreases on each product?