Bank lending will end the credit crisis

The head of the International Monetary Fund (IMF) says he hopes the actions taken by governments will be powerful enough to persuade banks to start lending again, and that he IMF is ready to lend to any country that needs help.
Speaking at the G20 meeting in Washington, Dominique Strauss-Kahn says this would bring an end to the credit crunch.
But he has warned that the global financial system is near to meltdown, saying the IMF has been calling for co-ordinated action on the crisis for some time.
Mr Strauss-Kahn says the crisis is not limited to advanced economies and the IMF is ready to lend to any country that needs help.
"The fund has asked for weeks, if not for months, for more co-ordination in action, arguing that in such a crisis that it was impossible to look for domestic solution," he said.
"Action taken in some countries without coordination with other countries can hurt more than it helps."
The G20 group of leading economies has agreed to coordinate efforts to respond to financial turmoil in world markets.
The group says it will use all means available to ensure the stability of the global financial system.
In a joint statement the group emphasised the need for nations to communicate to ensure that benefits to one country do not destabilise other economies.

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.

Global wave of rate cuts could not save the stockmarkets

The dramatic Australian official interest rate cut this week by the RBA was followed by smaller cuts by central bank around teh World, but has had little effect in confidence in the world's stock markets as shares have repeatedly fallen all week to make this week the worst for 21 years on Australian Markets.
Mr Mortgage said that the interest rate reductions would not solve the banks liquidity problems or the trust between banks that they will be repaid on funds advanced.
With so many failing institutions in the US and Europe the problem will take to work through.

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.

Stop spending on plastic

Credit card borrowers have been told to cut spending through the Christmas period.
Use the rate cuts windfall to pay down your credit card debt.
Because of Global funding cost rises you cannot expect the banks to pass on all the rate cuts coming over coming months, though the Government and opposition will be putting a lot of pressure on them to comply to this expectation.

In the Christmas holiday season borrowers should be thinking about reducing their credit card debt, as we don't know how the financial markets will affect the rest of our economy.

Credit card debt generally rises due to increased spending, but we have seen that most cardholders have started to reduce their balances.

Aussie banks safe as houses

Australian Prime Minister Kevin Rudd reassured Australians and said that Australia's retail banks were among the safest in the world.
The Opposition Liberal party has warned of the danger of bank runs in Australia which could destroy smaller banks and credit unions.

Mr Rudd said that the World Economic Forum had yesterday released a report rating Australia's banks the fourth most sound in the world in a ranking of 134 nations.
While the road ahead was rocky, Mr Rudd said the nation's economic fundamentals remained solid. "We have a strong budget surplus as a buffer for the future, and to be used to meet the challenges of the future," he said.

Mr Rudd has suggested his Government might move to protect up to $20,000, but Mr Turnbull said guarantees had to be provided for $100,000.

Opposition Leader Malcolm Turnbull said the Government must back bank deposits to assure individuals and small businesses that at least the first $100,000 of their savings was safe. Australia and New Zealand are the only OECD countries without a direct government-backed guarantee on bank deposits.

Mr Turnbull said the crisis had already sparked a shift towards the Big Four banks at the expense of smaller players.
"There is a real risk at present that depositors will shift their savings from smaller institutions such as regional banks and credit unions to the Big Four banks," he said. "This has the potential to considerably strengthen the big institutions' competitive position at the expense of their smaller rivals."

Mr Swan said that Australia's well regulated, well capitalised banking system would provide a bulwark from the fallout.

The silver lining from all of this is the increasing certainty that interest rates could fall by as much as 2 per cent more [to a cash rate of 4%pa] by mid next year.
This will be the sort of solution that mortgage payers want to see happen.

Another credit card day another million dollars for your bank

Every day that your credit card interest rate remains high, it gifts every the major bank almost $900,000. No wonder you can't pay your bills or your card card down!
Australia's four big banks have failed to deliver any relief on the nation's credit card holders despite the RBA discounting official cash rates by a full 1 per cent.
Fears of global recession yesterday wiped $56 billion from the value of local shares and sent the dollar plunging to a five-year low.
The Australian stockmarket dived 5 per cent. Bank stacks were hit hard.
In a move that had been anticpated by Mr Mortgage on Tuesday, lobal central banks took the necessary step last night of co-ordinating a series of interest rate cuts in a bid to stop further stockmarket plunges.
But as world markets melt down analysis commissioned by The Courier-Mail shows that each day the interest rate on credits cards remains unchanged, Australian banks pocket an extra $886,500.
If the rates remain frozen for a whole month, banks will score a windfall profit of almost $27 million, according to finance research house Cannex.
A leading consumer advocate yesterday angrily hit out at the banks, accusing them of hurting ordinary Australians doing it tough.
"Not passing on any interest rate cut to credit card holders is just punishing people who are already struggling," said Nicole Rich, of the Consumer Action Law Centre.
Almost every Australian adult has at least one credit card and the nation's collective card debt, attracting interest, has blown out to $32.4 billion.
As the global economic firestorm gathers pace and hits the Australian economy, many households will find it harder to pay off ballooning credit card debts.
Many popular Australian credit cards have interest rates as high as 20 per cent and Cannex calculates the average credit card interest rate is 16.8 per cent.
On Tuesday, all big four banks moved swiftly to cut home lending rates by 0.8 per cent when the Reserve slashed the cash rate to 6 per cent, but it is a different story when it comes to credit.
The Courier-Mail contacted the Commonwealth, the ANZ, National Bank and Westpac, who all conceded credit card interest rates remained unchanged but insisted they were "under review".
A spokeswoman for the Australian Bankers Association refused to comment on credit card rates, saying it was a matter for individual banks.
Sharemarket battered
In another day of high drama, there were further signs the Australian economy could be tanking.
The Australian sharemarket dived yesterday with the All Ordinaries shedding a hefty 228 points.
Consumer sentiment fell to near 17-year lows and the number of owner-occupied housing loans fell for the seventh straight month.
Craig James, of Commonwealth Securities, said the new data justified the Reserve Bank's decision to go for a 1 per cent cash rate cut on Tuesday.
The four major banks have all opted to pass on 80 per cent of the cut – 0.8 per cent – on home loan rates.
But Opposition Leader Malcolm Turnbull tried to claim credit, saying if it was not for the Opposition then the banks would not have passed on such a large amount.
"I have stood up for borrowers and I think borrowers have got a better deal as a result," he said.
Treasurer Wayne Swan hit back, accusing Mr Turnbull of letting his arrogance get out of control.
"I know Mr Turnbull thinks that the whole world revolves around his ego, but there are some events in the world which are much bigger than Mr Turnbull's ego," Mr Swan said.
Meanwhile, economic researcher, David Richardson, of The Australia Institute, estimated Australia's big banks could boost their annual profits by $1.4 billion by not passing on the full 1 per cent rate cut on home loans.
But the Commonwealth Bank has vowed to reduce its mortgage rates by more than 1 per cent when markets return to normal.
The Commonwealth yesterday also announced a takeover of BankWest in a deal worth more than $2 billion.
Queensland Premier Anna Bligh said although the Prime Minister had insisted banks absorb some of the cut, the full savings should be passed on as a "matter of principle".
"I understand the Prime Minister has been saying he believes that this interest rate cut should be passed on as fully as possible," she said.

PM supports banks not passing on the full rate cut

Kevin Rudd supports tha banks not passing on the full cash rate reduction of 1% by the RBA yesterday.
According to Mr Mortgage there was an expectation by the RBA that the banks would not be in a position to pass on the full reduction, and that in his opinion was the reason for the anticipated 0.5% reduction being doubled to a 1.0% rate cut. So the mortgage belt should as a whole be well pleased with the outcome.
Where this will be enough to kickstart home buyers into making offers on homes in the near term remains to be seen.
I suspect that further cuts will be required to give new home buyers the confidence to move forward in this he feels.
Mr Rudd says he supports the banks' decisions this time, he has also urged them to pass on further cuts if conditions improve.
"As financial markets stabilise we expect the banks also to pass through the rest of the interest rates over time."
However, Mr Rudd conceded that his defence of the banks' position not to pass on the full cut to borrowers may be unpopular.
"My job, and sometimes it's going to be very unpopular, is to argue in defence of the stability of the Australian banking system," he said.
"That means making sure we get these decisions right."
Mr Rudd said "despite worsening global conditions there are strong grounds for Australia to remain optimistic about its economy but there must be a balance between a strong banking system and relief for borrowers."

Commonwealth Bank to buy Bankwest with Suncorp next

The Commonwealth Bank (CBA) says it will buy Australia's largest wholesale bank, BankWest from cash strapped parent British Bank HBOS for AU $2 billion.
This is just a few months after BankWest announced plans to roll out 100's of bank branches in NSW and QLD to consolidate its position in these markets. At the time it was noted that they would not be able to find suitable retail space in a then bouyant retail sector.
The Commonwealth Bank will pay more than $2 billion for BankWest and its wealth management business, St Andrews Australia.
The Commonwealth Bank says it will raise the $2 billion by selling shares to institutional investors to fund the deal.
The CBA also says it has held high level discussions with Queensland's Suncorp which wants to sell its banking business.
The purchase of BankWest will allow the CBA to expand its presence in the lucrative Western Australian market, which is being driven the the region's resource boom.
There are fears that the takeover will result in job losses.
BankWest has an extensive network of branches in WA and last year launched a program to open 160 branches nationwide.
It also has call centres and other administrative operations based in Western Australia.
According to Mr Mortgage the CBA will have to deal with relatively small losses as a result of the US financial crisis, including a $100 million loss as a result of its exposure to collapsed US investment bank, Lehman Brothers.

As the credit card turns 50 how will you celerate?

Although Diners Club was launched in the late 1940's, it was used for dining purposes, and so American Express introduced the World's first credit in October 1958, and if you are not celebrating, then perhaps you like them too much. That was in the days when it really was a card. Plastic was a long way off.
In its first year alone Amex signed up 500,000 customers worldwide, including Elvis Presley and US president Dwight D. Eisenhower.
Since then it has changed the way people buy and view money and has meant that saving is a thing of the past. Overall why go through the pain of saving money when you can have things now?
With the current financial crisis don't expect easy credit. Mr Mortgage suggests that you pay down your credit card and switch to a debit card. Yes I know that that is even more pain than saving, but If you have a job and an income its time to give debt the flick.

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