Australia Guarantees all bank deposits and shores up non bank mortgage lending

Australia's Prime Minister Kevin Rudd has announced three measures to help to build confidence in the Australian Finance market.
Firstly he says that the Government will guarantee all deposits, regardless of ammount, in all Australian banks, building societies, credit unions and in the Australian subsidiaries of foreign banks. This move will prevent any run on bank funds from nervous deposit holders.
It will also stand behind the money that Australian banks borrow from foreign institutions. This should help build confidsence in other banks dealing with Australian banks, a major concern in the US and Europe right now.
Thirdly, he annouced that the Government would add another $4 billion into the secondary mortgage market to ensure the non bank market can compete effectively with banks for new mortgage loans.
Mr Rudd said,"Australia is better placed than almost any other country in the world to deal with this crisis.
"We have the best bank regulators in the world our banks balance sheets are strong and healthy."
Opposition Leader Malcolm Turnbull has welcomed the Government's move to guarantee deposits and the banks' overseas borrowings.
Australia's mortgage industry is well placed to move forward.

Housing market slow down will hopefully reverse

The housing market in Australia continues to slow and the 1% cash rate cut, which has effectively given a 0.8% mortgage interest rate reduction has helped homeowners, but is not expected to assist new home sales till the financial turmoil has subsided.
The Housing Industry Association (HIA) survey found new home sales fell 1.3 per cent in August, following a 7.2 per cent decline the previous month. September figures are expected to come in slighly better.
Sales of detached houses fell 2.4 per cent in August, the seventh monthly fall in a row.
Multi-unit sales rose by 5.8 per cent in the month, which was only the second increase in calendar 2008 so far.
HIA chief economist Harley Dale said tight conditions in the rental market will continue because not enough houses are being built.
Mr Dale also said a lack of available housing and high interest rates are hindering first home buyers trying to enter the property market.
"A shortfall of 45,000 dwellings this year alone is showing up in significant financial distress for lower income renters," he said.
"Further interest rate deductions have a vital role to play in complimenting supply boosting policies.
In August, Western Australia weathers the largest fall in homes sales, down 5.6 per cent after after dropping 24.5 per cent in the month before.
Queensland recorded a 4.7 per cent fall in new home sales while South Australia dipped 4.3 per cent lower.
New home sales in NSW rose one per cent while Victoria posted a modest 0.3 per cent gain.
The survey was compiled from a sample of Australia's 100 largest residential builders.
Hopefully we will see a lifting of orders for new homes after Christmas but traditionally sales do fall off before christmas.

Wells Fargo Bank goes bargaining hunting in the mortgage meltdown embers

The US finance sector may well have creatored [John McCain's words, not Mr Mortgage's], but that hasn't stopped Investment Guru and billionaire investor Warren Buffett raked over the smoldering ruins and buying in big into Goldman Sachs, nor a $US15 billion ($19.3 billion) takeover of struggling mortgage lending specialist Wachovia by Wells Fargo Bank [with Warren Buffett in the background]. Not so fast says Citigroup, we had a deal here.
And a New York judge agreed with them in principal, and has blocked the sale pending review of a pre-existing agreement giving Citigroup exclusive rights to negotiate a purchase of Wachovia's banking operations for $US2.2 billion. [What a deal!]
The Citigroup-Wachovia deal was brokered by the Federal Deposits Insurance Corporation, which had agreed to take on potentially hundreds of billions of dollars of future Wachovia loan losses to ensure it went ahead.
The deal was topped on Friday when Wells Fargo, whose biggest shareholder is Mr Buffett, countered with a seven times higher offer that required not a single dollar of support from beleaguered US taxpayers, who last week footed the bill as Congress signed off on a $US700 billion bailout of Wall Street finance and banking firms crippled by the credit crisis.
But the buy price is not the only consideration, as the FDIC supportedthe original Citigroup-Wachovia deal it brokered because under the terms of the Citigroup-Wachovia deal, the FDIC had agreed to take onboard all Wachovia loan losses above $US42 billion.
On Friday FDIC chairman Sheila Bair said she would review all proposals that were on the table and work with the primary regulators of all three banks.
Citigroup, which is reportedly seeking $US60 billion in damages, is counting on the courts upholding the agreement that forbade Wachovia from entering sale negotiations with other parties until after October 6.
The orders issued in the New York Supreme Court on Saturday by Justice Charles Ramos now extend that agreement until further court action between the parties, which are the third largest (Citigroup) and fourth largest (Wells Fargo) banks on Wall Street by stock market value.
In the end, Citigroup may be snookered by a provision in the Wall Street bailout legislation that raises questions about the enforceability of contracts relating to pending acquisitions in which the FDIC is involved.
If it fails, Citigroup will be left with no alternative but to make a better offer.
Wells Fargo had been in the hunt for some time, but a week ago dropped off, leaving Citigroup the only suitor and in a powerful position to squeeze federal authorities for support. But after consultations with its advisers JPMorgan Chase, and Wells Fargo secretly re-entered negotiations with Wachovia late last week and pulled off a stunning deal that caught Citigroup by surprise.
Let's see what happens next, but both Citigroup and Wells Fargo both know that Wachovia is a bargain, especially with the US tax offsets on offer from the bailout package.

Australian Banks are strong and profitable

Australian banks have suffered little over the recent Wall street financial crisis and are enjoying record profits. So according to Mr Mortgage any Bank in Australia has no excuse for increasing their margins as the Reserve Bank of Australia reduces the official rates as it is expected to do over the next few months.

The fact is that mortgage profit margins have been reduced by over 2% since 1997 when they felt the effects of competition from non mortgage lenders and the army of mortgage brokers that used these products.

It is the non-bank mortgage lenders who are having a tough time getting competitive funds right now, and the banks are seeing their opportunity to move their margins higher in the wake of this reduced competition.

Official figures show the profit margin for the major banks was 54.8 per cent in the March quarter, resulting in $1 profit for every $2 in interest and fee income they charged. 

When rates were lifted recently the Commonwealth, the National Australia Bank [NAB], the ANZ and Westpac all lifted their mortgage rates by more than the Reserve Bank official cash rate.  

Also the official figures released yesterday by the Australian Prudential Regulatory Authority show that the interest income of the four major banks from loans was rising by substantially more than the interest they were paying to depositors and the wholesale markets. 

Rising interest rates and increased lending through larger loan sizes enabled the banks to raise their interest income in the quarter by $7.2 billion, compared with a year ago, to a record of $31.9 billion. 

Interest costs were up by $6.3 billion in the same period, with net interest income moving ahead by 12.9 per cent to $8.3 billion. 

So if your bank is charging you too much interest on your mortgage you should visit Mr Mortgage and get a mortgage quote