The figures on employment showed only slight growth, the housing sector is still slowing, building applications in the housing sector still down and retailers in crisis talks about lack of sales.
So why did the Reserve raise rates again when all the analysts had predicted no rises until 2011?
The Commonwealth Bank via it's CEO have been saying for a while now that money is too hard to find at low rates, and that the cost of making profit (record profit after record profit I might add) means that they will have to increase consumer rates over and above the cash rate set by the Reserve even if they do raise it because lending cannot be allowed to affect their bottom line.
So at this very much surprising rate rise it's not much of a surprise to see the Commonwealth adding to the official rate rise with an additional rise of their own.
So Ok, we need to ask a couple of questions, firstly with all the indicators suggesting inflation is not rising, and that the economy is not rising out of control, why a rate rise at all? and secondly Why the nation's biggest holder of home loan portfolio has to raise almost the same ?
Taking a look at lending, not just home loans or mortgages, you start to see that there is considerable discounting on commercial rates to attract big, more risky, but more profitable commercial loans, the lending book of many lenders is more specialised but not so with the commonwealth, and if they are to attract big business it has to be at the cost somewhere else, and what better place than where the loan holders cannot fight back, Home loans.
I won't bore you with figures, you can look at the bragging sheets from the bank itself, to see just how much of their lending portfolio as a whole is in mortgages for homes, and just how big their total portfolio is, and also at just how big their profit is for the shareholders who have over the years made capital growth as well as very good dividends on those shares.
The probability is that you the mortgagee will be, after the rise is implemented, propping up the big end of town who can afford it a hell of a lot more than you can.
If I were a betting man, and I'm not I always loose, but if I were I'd put money on it being the case that the Reserve Bank raised rates to cover for the Commonwealth Bank wanting to raise its own, It's my opinion that the commonwealth bank has too much influence on the Reserve and the Government as well.
If anyone has loans with the commonwealth bank right now i feel really sorry for you, I don't think it will be long before the others also put up rates as well but they may hold back just a little because this is the perfect opportunity to take business share in the market by remaining on a lower rate.
