Posts Tagged ‘home loans’

Banking in Australia and Great Britain: A Comparison

Thursday, August 30th, 2012

It’s not unusual for Aussies to shadow the UK’s developments, and in many cases, to learn lessons from them.

Firstly, there was the MPs expenses scandal, which struck the UK back in 2009. This prompted a small probe by Australia’s Daily Telegraph into the practices of Canberra MPs.

But it’s only really struck notoriety in 2012, with the report into MP Craig Thomson and the revelations about credit card misuse by a number of government departments.

There’s also the case of Australian banks. Having witnessed the collapse of Northern Rock in the UK and the considerable bailout afforded to the Royal Bank of Scotland, large Australian banks have kept revenues and profits high.

There will be few who argue against the merits of strong banks, particularly given the fate of European and American counterparts. Many of these are now under investigation for alleged manipulation of the inter-bank lending rate during the inception of the global financial crisis.

But for many, it’s hard to accept the banks’ ability to pull in record profits during a global financial crisis, when many are living on the breadline and trying to negotiate their way through a stuttering economy.

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Comment: Ents and Entrapment

Tuesday, April 17th, 2012

Ents & Entrapment

In the 1999 film Entrapment, Catherine Zeta-Jones plots to steal $8 billion. She’s negotiating the help of genius partner-in-crime, Sean Connery, who reasons for his equal share.

“What can you do with $7 billion that you can’t do with 4?”

“Hold the record. Alone”.

One might wager that this same self-adulation has consumed the boardrooms of Australian banks in recent years.

A move by St. George Bank to lower lending rates on 1-year, 2-year and 3-year fixed-rate home loans must be deemed admirable in a climate where banks have cried poverty like a broken record despite – ironically – record-breaking profits.

But it should equally ensure that the wool that has constantly been pulled over consumers’ eyes is, at last, fully removed.

Read more at Which4U

Concerns Mount for Australian Banks

Friday, December 2nd, 2011

Consumers might have been forgiven for thinking that a timely boost was set to come their way in time for Christmas.

It is widely predicted that central interest rates, which had remained untouched since April 2009, will fall for the second consecutive month when the Federal Bank’s committee convenes next week for the final time in 2011.

But the untimely downgrading of Australian banks by credit ratings agencies this week has put a new complexion on the immediate forecast for bank funding, irrespective of whether a central rate cut is announced or not. Consumers are set to lose out when they may have expected to benefit.

Downgrading

Standard & Poor’s have downgraded a number of major banks worldwide, including Barclays, HSBC, Goldman Sachs, UBS in Switzerland and the Bank of America. In Australia, the Commonwealth Bank, ANZ, National Australia Bank and Westpac all fell by one grade to AA[-], the agency’s fourth-highest rating. Macquarie Group was cut by two levels to BBB, a grade which anticipates a level of risk from adverse economic conditions.

What these reductions do is heighten insecurity for banks to lend to one another. This, in turn, raises the cost of lending as banks insure themselves from that elevated level of risk.

Such costs will no doubt be absorbed by consumers through less competitive savings and loan rates. A central interest rate cut may prove welcome only insofar as it prevents loan rates from rising.

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First test for mortgage exit fee legislation

Friday, November 4th, 2011

The ban on mortgage exit fees introduced in July have been making their first impact this week, following the 0.25% interest rate cut made by the Reserve Bank.

All major lenders have been compelled to respond in the knowledge that home loan holders are now able to walk away from any home loan deal without incurring financial penalties.

November’s interest rate cut from 4.75% to 4.5%, the first cut in 2 ½ years, has provided the first real pretext for banks to respond amid concerns that, under the new legislation, loan holders could easily defect to banks offering better deals.

Were the full 0.25% cut to be passed on to consumers, the average standard variable mortgage rate would be falling from 7.79% to 7.54%, saving roughly $50 per month on an average mortgage.

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