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.
12 comments:
You'd have to say that it looks like once again that the world's second most inept Treasurer, (Queensland's Fraser is the most inept) is playing catch up and after weeks of saying leave the banks alone and we don't need further banking regulation, is now copying the opposition shadow Treasurer's call for some form of regulations to keep banks for gouging the mortgage holders.
It's now all to late of course and rates will be well into the 7%'s accross Australia and well on their way to 8"s for a lot of lending products.
The interest rate has now crossed the line between affordable and struggling for the majority of mortgage holders.
Whilst Wayne Swan has twiddled his thumbs and made comments about the integrity of the Australian Banking sector and it's strong position in the world compared to other western nations, the banks have made greater and greater profits and now the corporate greed has become malignant.
I think the independents and Greens have a great deal to answer for with their decision to back a government that has allowed ordinary battlers , voters to suffer whilst the banks record record profits and at the same time lift rates claiming they cannot make money at almost a 3% mark up on the rate they can access it from the reserve.
I guess we deserve it, we didn't make our position clear enough at the last election, even with a distince vote against the Labor government accross Australia the independents and Greens couldn't see that the people wanted change and have put their voteing power behind the people being forced to suffer and struggle financially.
If you don't like an almost half a percent rate rise, let your bank know that you'll be moving your mortgage away if they follow the commonwealth, and let the independents know that they have bastardised your vote with their decision to back a government with its head in the sand on banking.
And vote them out next election.
Lets hope that the predictions of us going back to the polls in 18 months are true.
While Ms Fancy pants flits around in our jet, not having much of an impact on other leaders we have to endure the cost of her party's mess.
Wayne Swan has gone from really caring about constituents to being a gopher for the pretender.
As usual Uno the comments are
a bit light on with my `non`
Logan blog on almost the
same matter, i like the
way in which you have
covered it looking at
it from a purely business
perspective, the heat you
have put on the commonwealth
bank is great and there needs
to be more of it. Great minds
think almost alike, i wrote a
blog on the Reserve Bank, but
i have kept my interpretation
of it to a more political lev-
el. I still think you`ve only
got yourself to blame if you
keep banking with the common-
wealth and the other 3 big
banks, there are plenty of
choices for banking custom-
ers with building socities
and credit unions. Why deal
with these pricks when you
can get a much better deal
if you go looking. Loyalty
to banks can be as silly as
loyalty to political parties
or unions. But your take on
the relationship between big
business and the reserve bank
is spot on.
The Which bank has to pay for the losses they will incur formthe still to be settled STORM dabacle. If people do their homework they will fing that five persons were sacked from the northern region around allegations that arose from the Storm enquiry. the level included some tall state timber and one HOTSHOT who held superior court for several years on the back of what he wrote for those customers. So it will only get worse as the realisation of what it is really going to cost the CBA is truthfully revealed.We have only heard about the Tip of the iceberg at present.
Once again its the people who have to foot the bill. Australians can only blame themselves for allowing Governments and big business to screw them.
The CEO's pay packets are diabolical. How can anyone be worth 11 million a year? It is time for a reality check.
And they deny any class distinction in Australia??? Tell that to the 100's of thousands who are homeless and those who soon will be.
Changing from one bank to another is not quite that easy for some - don't think for one minute that the smaller institutions are going to accept all mortgagees with open arms. While some exit fees are quite large, the new establishment fees can range from $300 to $1,000.
Personally I believe its time for the Federal Government to kickass.
One also has to ask why Australia's interest rates are the highest in the world. It is greed or bad management?
The Government has to step in and remove fixed loan escape fees, it's a crock. My loan is with the other Major bank and to get out of it recently cost me over $20,000, but I actually saved that in the first year out and have benefitted since by quite a lot. My advice would be to dump the big banks and really there is only two, the red and the yellow, because they have the majority share of mortgages, but I would never go back to them again.
I know it slightly off the
track, but on the subject
of money and spending it
appropriately, why is the
media not making it front
page headlines about the
$500 million which Julia
Gillard has gifted Indo-
nesia so that country can
build a heap more islamic
schools. I am not sure if
it has been passed by the
parliament or not, or i`m
quite sure Gillard cannot
just offload that sort of
taxpayers money to score
some browny points with a
foreign government. This
is one matter which MUST
be scrutinised immediate-
ly by everyone else bar
the politicians and the
vast majority of journos,
because i already know
that they wont bother.
Tim, don't be so racist, one day you and everyone else in Australia will be either under the rule of the Chinese imperial army or become a muslim, even bogan racist hardliners like you, so get of your Klan hobby horse and put the sheets back on the bed and stop trying to provoke more fear than already exists in this biggoted country.
Anon 4:36 - Wow! I suggest you read your comment again - its as clear as mud!
I agree with Tim. This country is already in deficit, we have at least 100 thousand AUSTRALIANS who are homeless. With the cost of living increasing as we speak, there will be more. It was reported that in August alone 192 homes were repossessed by one bank.
Our illustrious PM should stop throwing money around like its hers. Charity begins at home.
Hi 8:29, . . . I think 4:36 was trying to be a little too clever with what is clearly a tongue in cheek comment, and obviously you didn't get the humour, but I'm guessing Tim did or I'm pretty sure we would have been already reading his rapid fire shoot from the hip response.
BTW what about the Bank of Councils? Now some folk don't owe more than 3-4 thousand at worst but 11% interest on arrears????
I was always under the impression that only financial and lending companies could charge interest and Government departments late fees.
Now there's talk of a referedum to include local government in the Australian Constitution - how does one incorporate a corporate body?
I still strongly believe that councils should revert back to municipalities - that was the only time they actually worked for the people!
The reason why i`m still going
in the blog game after all this
time is because i dont stop to
believe my own press, and i`ve
learnt not to be baited as well.
Whether it was satire or just
plain stupidity, i did have a
good belly laugh about the
above comment and i didn`t
feel the need to shoot from
the hip in my typically kick
ass style that makes people
want to hit the cream sherry.
I better shush now, even i`m
starting to take the piss out
of myself.
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