2019 Money Magnet Symposium - Discover how to make, and keep, more money and achieve a financially empowered future
Viewing 19 posts - 1 through 19 (of 19 total)
  • Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Sure everyone heard but just in case

    At its meeting today, the Board decided to raise the cash rate by 25 basis points to 4.75 per cent, effective 3 November 2010.

    The global economy grew faster than trend over the year to mid 2010. Global growth will probably ease back to about trend pace over the coming year as strong recoveries in the emerging world give way to a more sustainable pace of expansion and growth remains subdued in the United States and Europe. At the same time, concerns about the possibility of a larger than expected slowing in Chinese growth have lessened recently and most commodity prices have firmed, after a fall earlier in the year. The prices most important to Australia remain at very high levels, with the result that the terms of trade are at their highest since the early 1950s. The turmoil in financial markets earlier in the year has abated, though sentiment remains fragile.

    Information on the Australian economy indicates growth around trend over the past year. Public spending was prominent in driving aggregate demand for several quarters but this impact is now lessening. While there has been a degree of caution in private spending behaviour thus far, the rise in the terms of trade, which is now boosting national income very substantially, is likely to lead to stronger private spending over the next couple of years, especially in business investment.

    Asset values are not moving notably in either direction, and overall credit growth remains quite subdued at this stage notwithstanding evidence of some greater willingness to lend. The exchange rate has risen significantly this year, reflecting the high level of commodity prices and the respective outlooks for monetary policy in Australia and the major countries. This will assist, at the margin, in containing pressure on inflation.

    The demand for labour has continued to firm. While the labour market is not as tight as in 2007 and 2008, some further strengthening would appear to be in prospect, judging by the trends in job vacancies. After the significant decline last year, growth in wages has picked up somewhat, as had been expected. Some further increase is likely over the coming year.

    Given these conditions, the moderation in inflation that has been under way for the past two years is probably now close to ending. Recent information suggests underlying inflation running at about 2½ per cent, with the CPI inflation rate a little higher due mainly to increases in tobacco taxes. Both results were helped somewhat in the latest quarter by unusual softness in food prices. Inflation is likely to rise over the next few years. This outlook, which is largely unchanged from the Bank's earlier forecasts, assumes some tightening in monetary policy.

    For some time, the Board has held the stance of monetary policy steady, which has resulted in interest rates to borrowers being close to their average of the past decade. This allowed some time to observe the early effects of previous policy changes and to monitor the uncertain global outlook. The Board is also cognisant of differences in the degree of economic strength by industry and by region.

    However, the economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity. Looking ahead, notwithstanding recent good results on inflation, the risk of inflation rising again over the medium term remains. At today's meeting, the Board concluded that the balance of risks had shifted to the point where an early, modest tightening of monetary policy was prudent.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Wow CBA didnt waste time they have increased their interest rates already.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of DWolfeDWolfe
    Participant
    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    Cheers Richard as always for putting this up, I hadn't heard :)

    I'm sure all the banks will be running faster than the horses in the Melbourne cup.

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
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    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    And rubbing their hands with glee.

    25bps from the Reserve means 40 bps from the majors.

    Sorry scrub that CBA up 45 bps wow nothing a cash grab when you can.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Ben KBen K
    Participant
    @ben-k
    Join Date: 2010
    Post Count: 103

    what does this mean for those wishing to borrow, simply higher interest rates or an unwillingness to lend from major banks now?

    thank you for posting Richard

    Ben

    Profile photo of BankerBanker
    Participant
    @banker
    Join Date: 2010
    Post Count: 371

    It means less money available to borrowers.

    Not only do buyers need to watch there own budget, the banks will take the higher rate in to their debt servicing calculators so everyones max loan amount will drop a little.

    With some developers in Melbounre already having trouble moving stock, Property Investment companies sales dropping, AFG Reporting a terrible month in OCT for loan applications ( refer brokernews.com.au), and now higher rates again adding to the mix; I think this will be an absolute downer on the property market – especially investmet properties e.g. Off the plan, serviced / student accom etc.

    Although this will tip a few people over the edge – I personally would like to see 10 years of nil growth or even a little price reduction to keep property ownership open to the average Australian. One thing I hate more than rates rising is the concept than my kids will never buy a property off their own back and that property in the future will only be available to kids with rich parents.

    Will be interesting to see what the other majors will do. All have the same pressuress CBA…

    Owch…

    Profile photo of gronk007gronk007
    Member
    @gronk007
    Join Date: 2005
    Post Count: 54

    I don't normally engage in bank bashing, so let me qualify this post with 2 statements:

    1. I own CBA shares – (gift for me when I was younger)
    2. I don't have a mortgage with CBA (anymore)

    After announcing their $5.6bn profit, hiding behind "increased funding costs" is wearing a bit thin….I'm glad I don't have a mortgage with them anymore.

    These guys are filth. I have friends who are CBA employees, and despite the mega profits of over $30bn the last decade, they all got a paltry $800 pay rise for the YEAR, this year.

    The money's going somewhere; yes, some are going to dividends, but not all of it, and differential funding costs are back to PRE-gfc times.

    Aside from that, I'm sick of Wayne Swan's indignation for the 45th time. Do something about, or shut up.

    If you've got a mortgage with CBA, and you've been with them for longer than 3 years, switch.

    If you have an interest bearing account with the CBA, ask when you're going to get your .45% on your savings, and if you don't get it, switch.

    If you have a non-interest bearing account with the CBA, move to a credit union, fast.

    There's talk on the posts about interest rates dropping soon (ish). There will not be any interest rate drops any time soon…..

    There are people out there with real financial hardship, and I'm talking below the bread line. Very few people on these forums can say they are below the bread line, let alone the "working poor"..I don't normally engage in bank bashing, so let me qualify this post with 2 statements:

    Profile photo of MikeANMikeAN
    Participant
    @mikean
    Join Date: 2004
    Post Count: 2

    An interesting thing though. If the banks keep on increasing the interest rate above what the Reserve bank dictates, then that actually makes it less likely that the Reserve will need to raise rates so soon next time.
    I suspect the banks have worked this out and have made a decision that the extra revenue might as well fall to the banks instead of the Reserve.
    Of course, it would be difficult for the banks to raise interest unilaterally, so I think its a more convenient trigger to wait for a rise by the reserve. Then most of the 'blame' falls to the Reserve and falls away from the banks.

    On the other hand, for investors is this such a bad thing… if the rates are higher then less home ownership, and more renters. Ultimately it could be better for first home buyers as well if the result is that house prices are contained by the higher interest rates… but no doubt quite a bit of pain now.

    Just to put this in context though…. I recall when interest rates leaped to 17%. That was scary.

    Profile photo of Naremburn123Naremburn123
    Member
    @naremburn123
    Join Date: 2008
    Post Count: 61

    Hey guys,

    Yep I think this will really slow the market down. And if the other big 3 follow with their own rate hikes it could get really interesting. Especially in the mortgage belt areas like Sydney's outer west. I was checking our rates from a few years ago, and people were getting loans at 5% SVR. Now we're 2% higher. That's huge for the average family.

    What does everyone think about the prospect of the other banks also increasing rates?

    Dean

    Profile photo of MikeANMikeAN
    Participant
    @mikean
    Join Date: 2004
    Post Count: 2

    I think the chance of the others following suit is between likely and certain. I recall at least one of the others stated that they would do this when the RBA moved.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Oh i think all 3 other majors will follow suit in some form or shape and really just didnt want to be the first to make the leap.

    The fact that CBA came out and did it so quickly makes you think that it was a pre-decided that if the RBA went they would increase immediately and didnt need another excuse.

    Of course we all understand the reasons why being that overseas funding costs are increasing month in and month out and the pool of savings deposits is reducing. We are now not a nation of savers but a nation of credit and this credit needs to be sought from somewhere.

    As Banker mentioned an increase in rates will have a knock on effect as it also means an increase in serviceability rate being the benchmark that lenders use to see whether you can service the loan irrespective of the actual charging rate.

    Lenders all work out serviceability in different forms and shapes all with a common goal just a different way of getting there and with different factors considered.

    Since the CBA annoucement we have had 9 new enquiries (some from forum members) all concerned that what they could qualify or do prior to 1.30pm this afternoon they can't now.

    It is amazing that with another lender they still bolt in.

    With the Banks coming under the NCCP umbrella effective Jan 1 2011 i think there will be a lot more deals lenders will be rejecting and dont think it bears very well for someone without sounds credit, savings or merely wanting to get ahead.

    Competition is slowly re-entering the market and I guess any decent Broker needs to face the fact that his phone / email will be ringing loader than normal over the coming months as lenders decline more and more deals for a variety of reasons.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Ben KBen K
    Participant
    @ben-k
    Join Date: 2010
    Post Count: 103
    Qlds007 wrote:
    With the Banks coming under the NCCP umbrella effective Jan 1 2011 i think there will be a lot more deals lenders will be rejecting and dont think it bears very well for someone without sounds credit, savings or merely wanting to get ahead.

    I cant imagine how many people it will affect in different ways, I wonder, if any of the major lenders decide not to make as adverse a change as the rest if it means they will get a huge gain in business,

    immediately after typing that i thought to myself, why the heck would they, its not like they need the extra, people need lenders and they will get the business anyway.

    /sigh

    Profile photo of Matt007Matt007
    Member
    @matt007
    Join Date: 2008
    Post Count: 259

    RBA notes have shown, and financial commentators have also supported, that funding costs have remained pretty flat the last few months. So the assertion by banks that their funding costs are increasing continually is in a word, bullshi*. I for one am well past having my intelligence insulted monthly by the Big 4. David Koch wrote a good article on it yesterday on news.com . au.

    If the RBA raises rates ok, it's the only blunt instrument they seem to have, but I think we'd all be happier if the banks didn't then double that rise and we'd all be in a much better position.

    Gee, do you think they could settle for only $3Billion profit?

    Makes me  sick to my stomach.

    Profile photo of Matt007Matt007
    Member
    @matt007
    Join Date: 2008
    Post Count: 259

    Another point to make – if banks aren't lending to developers to build, and they aren't goin to lend to people to buy, what happens then?

    Something big needs to change..

    Profile photo of DWolfeDWolfe
    Participant
    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    Yeah gotta say lotta BS flying around.

    Time to shop around for money. Time for smaller lenders to get on the backlash bandwagon and take advantage of the fact that everyone is sick of the lies and the banks. Sorry still can't stand Wayne Swan, he has always had the deer in the headlights look so of course the banks are probably snickering behind their hands at him.

    There is still money, it just costs more so it means that developers will try to charge more to develop or it will make some projects unviable meaning that the shortage of housing will not go away.

    I don't think rates will go to 17% but they will go up.

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

    Profile photo of orbitororbitor
    Member
    @orbitor
    Join Date: 2010
    Post Count: 6
    Matt007 wrote:
    Gee, do you think they could settle for only $3Billion profit?

    Makes me  sick to my stomach.

    isn’t the point of a company (in this case a bank) to try and maximise profit?

    I have to say that although I’m a mortgage holder and looking to buy more property, I can’t help but think that some cooling off on house prices is a good thing.

    Profile photo of BankerBanker
    Participant
    @banker
    Join Date: 2010
    Post Count: 371

    I’m not here to support the banks but it’s a little to easy to be short sighted and cry fowl at the RBA / Banks when this happens.

    Keep in mind a first home buyer will pay far more (approx double) as a percentage of their weekly pay to buy a home in Australia than they would have when rates were at 17%.

    It is important to note a couple of figures:

    Cost of buying:

    Loan of 300,000 at 7.0% = 21,000 per year
    Loan of 350,000 at 6.5% = 22,750 per year

    If the rise stops a property jumping from 300k to 350k – the figures above show that not only would the debt be more affordable – you would also save 50k plus some stamp duty on your next purchase.

    It is also worth noting. If housing affordability was addressed earlier and properties were 20% cheaper. The banks wouldnt be under the same funding pressures.

    I think if you look at the figures a little more closely – even the example I used above. Property will be more affordable even with higher rates if we can control the growth; investors will also benefit as yields catch up with prices and their reqirement of ever increasing debt slows.

    Personally, I along with many other investors would welcome another 1.0% increase to rates over the next year. This is assuming the government is still not taking any real steps to control housing affordability.

    In short – I think current growth is worse than rates increasing (yes even for investors).

    Banker

    Profile photo of dnshulldnshull
    Member
    @dnshull
    Join Date: 2010
    Post Count: 27

    Banker you make a good point, many of us here wouldn't disagree with what you have said.

    Were i get frustrated is that the Banks are just grabbing at cash.  After announcing 6 billion in profits? surely someone is having a lend of us.

    Dave

    Profile photo of Ben KBen K
    Participant
    @ben-k
    Join Date: 2010
    Post Count: 103

    One thing to remember is banks have margins on their loans, some as low as 1%… a small percentage against a considerable risk.

    one arguments i guess lenders have in their favour is that they too are a business, and need to raise the rates along side the RBA to ensure the margains remain stable and business over all remains sustainable. According to a good friend of mine in the banking sector, having more credit and funds/loan deposits come in mean they have more capital to lend out which brings the cost for banks to purchase funds to lend, down.

    A valid point he raised, was that if a $45 increase per month brings someone to the verge of bankruptcy then should said borrower have been lent the funds in the first place? again though, if they are told no from one bank, they will visit as many institutions as possible till the get the result, even if it brings financial strain upon them. a choice that the borrower makes, knowing what the payments are going to mean for their disposable income. According to my friend, we have also been in a period of rates being at an all time low, and that "anyone with half a brain" would know that rates would not stay this way with a labour govt in power, as historically they have had above average rates.  a very valid point i think.

    As a consumer, i am against such a steep points rise from lenders in retalliation for the RBA rise on the back of such healthy profits. i Believe houses are above average price at the moment (obviously not everywhere) and perhaps they could do with a track sideways or similar movement.

    Everyone has their own view on the current state of affairs but as someone who needs to be able to borrow in order to move forward, and needs a lender to look out for my needs in order to gain business (wishful thinking?) i am a little nervous, and hope the banks/major lenders dont become to hard to get deals across the line with..

    After talking to my friend today though i think that its a tough call for lenders to make, do whats right for them as a business, and make people unhappy, or, keep people happy.

    i think i know what the shareholders and execs would prefer 

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