Increasing numbers of people are finding it difficult to manage their finances, including their credit card debt.
Part 9 of Bankruptcy Act introduced in 1997 aimed at keeping people out of bankruptcy.
Debtors arrange to partly repay creditors over time debt agreements are one stop short of declaring total bankruptcy for the increasing number of people who can't pay their credit card debts, personal loans and bills.
A debt agreement under Part 9 of the Bankruptcy Act, allows debtors to strike a deal with their creditors to repay less than the full amount at an agreed weekly rate over a period of time – without any additional interest. It is an option for people with unsecured debts of less than $77,021 and after-tax income below $57,765.
Now big creditors seem to be getting tough and, according to debt agreement administrators, some are insisting on unrealistic returns from insolvent people.
Part 9 agreements were introduced in 1997 following widespread public concern about young people in particular having to file for bankruptcy over consumer debts such as small credit card debts or even mobile phone bills.
Since then an industry of debt agreement administrators has grown up, often relying on heavy marketing and with trading names such as Debt Assist, Debt Relief and Debt Busters.
They specialise in organising agreements and approaching creditors who vote on each proposal. Fox Symes is a market leader in the industry, filing about 300 agreements a month.
"Some of the big lenders have totally unrealistic expectations," says Deborah Southon, director of Fox Symes.
"People are coming through now with up to $78,000 in consumer debts," Ms Southon says. "You can't pay that back in less than five years and probably not at much more than 40¢-50¢ in the dollar."
Recent amendments to the Bankruptcy Act enshrine the principle that an insolvent person's debt agreement proposal must be affordable and therefore sustainable.
Debt agreement administrators say Westpac and St George Bank are among big lenders voting down debt agreements based on the debtor's ability to repay.
The administrators report a noticeably harsher approach from Westpac and St George compared with a generally supportive approach of the Commonwealth Bank and National Australia Bank in particular.
Some say that St George is telling them no less than 65¢ is acceptable, while Westpac is said to be voting down agreements that return less than 70¢ in the dollar, regardless of the circumstances of the debtor.
Penny Doube, a debt agreement administrator based at Tarragindi in Brisbane, says that on average her agreements involve an insolvent debtor repaying about 50¢ in the dollar over three years.
Ms Doube says St George has informed her that its minimum acceptable return is 65¢.
"St George have always been difficult to deal with," Ms Doube says. "They are not fond of Part 9s."
Administrators typically negotiate agreements that return between 40¢ and 80¢ in the dollar over three to five years. For that, they charge an upfront fee that usually ranges between $600 and $1500 and an ongoing commission.
Ms Southon says each agreement has to ensure that the rent or mortgage is paid, plus provide for utilities, food, essentials, children and the occasional medical visit.
Under the new voting rules, big creditors have increased power and cannot be easily outvoted.
"If St George is your majority creditor, then it is 'shut the gate and file now for bankruptcy', because they are not going to agree to anything," says one debt agreement administrator.
Melbourne debt agreement administrator Melissa Treherne says she is being sandwiched by tough creditors and the new rules, which require her to certify a debtor can afford repayments.
"The new rules are good, they have really cleaned things up but some of the creditors are just not looking at the budget of these people," says Ms Treherne.
"They say they have a new rule, nothing under 55¢ for example, and they won't be flexible about time or rate of return."
A Westpac spokesman says 70¢ "is one of its highest repayment guidelines" and it does apply lower proportions on a case-by-case basis.
A spokeswoman for St George Bank says the bank assesses each proposal individually.
"Most importantly, customers' specific circumstances are taken into consideration, and the final decision is not solely based on the return to the bank."
Digby Ross, the Queensland insolvency registrar, says the system requires goodwill by all parties in the industry if it is to succeed, including the big creditors.
"The major creditors have generally been very supportive, right through (the reform process)," said Mr Ross.
"Yes, definitely, it needs goodwill by creditors to succeed and the contact we've had has been positive." Source: Sunday Mail
Monday, November 16, 2009
Citigroup Sells Crowns Jewels after Subprime fallout
CITIGROUP is in talks to sell a majority stake in Smith Barney, the brokerage firm, to Morgan Stanley in a deal that would create the world's biggest wealth manager.
Picture: APThe negotiations came to light as Robert Rubin, the former US Treasury Secretary, resigned as senior counsellor and director of Citigroup after months of criticism for his role in leading what was once the world’s largest bank to the brink of collapse.
Under the deal being discussed by Morgan Stanley and Citigroup, 51 per cent of Smith Barney will be sold to Morgan Stanley with an option to buy the rest of the business within five years.
Morgan Stanley declined to comment on the talks and Citigroup did not respond to requests for comment. It was not clear how much the deal would cost Morgan Stanley.
The banks are expected to work through the weekend to finalise the terms of the deal. The merger would help Morgan Stanley, which converted to a bank holding company last year and subsequently received $US10 billion ($14 billion) in Government aid, to diversify.
Citigroup, which has taken $US45 billion in government funding, is likely to welcome the additional capital that the deal would provide. The move is also in line with the strategy of Vikram Pandit, the Citigroup chief executive, to downsize the business after the sub-prime debacle. Citigroup is dismissing 52,000 of its workers after it made $US20 billion in credit-related losses.
The bank also announced the resignation of Mr Rubin, who was Treasury Secretary from 1995 to 1999. In a letter to Mr Pandit, Mr Rubin said: “My great regret is that I and so many of us who have been involved in this industry for so long did not recognise the serious possibility of the extreme circumstances that the financial system faces today.”
Mr Rubin, who joined Citigroup in 1999, has been excoriated in the media as the force behind the bank’s decision to chase profits by pushing into risky credit-related products. His duties at the bank, other than using his network to attract clients, were not clear, but insiders said that his influence was pervasive.
In his time at Citigroup, Mr Rubin collected about $US150 million in remuneration.
Before becoming Treasury Secretary, Mr Rubin, who is a graduate of Harvard and Yale Law School, had a long career at Goldman Sachs, where he started on the arbitrage trading desk and worked his way up to become co-chairman of the elite bank.
Shares in Citigroup closed in New York at $US6.75, down by 5.7 per cent.
Picture: APThe negotiations came to light as Robert Rubin, the former US Treasury Secretary, resigned as senior counsellor and director of Citigroup after months of criticism for his role in leading what was once the world’s largest bank to the brink of collapse.
Under the deal being discussed by Morgan Stanley and Citigroup, 51 per cent of Smith Barney will be sold to Morgan Stanley with an option to buy the rest of the business within five years.
Morgan Stanley declined to comment on the talks and Citigroup did not respond to requests for comment. It was not clear how much the deal would cost Morgan Stanley.
The banks are expected to work through the weekend to finalise the terms of the deal. The merger would help Morgan Stanley, which converted to a bank holding company last year and subsequently received $US10 billion ($14 billion) in Government aid, to diversify.
Citigroup, which has taken $US45 billion in government funding, is likely to welcome the additional capital that the deal would provide. The move is also in line with the strategy of Vikram Pandit, the Citigroup chief executive, to downsize the business after the sub-prime debacle. Citigroup is dismissing 52,000 of its workers after it made $US20 billion in credit-related losses.
The bank also announced the resignation of Mr Rubin, who was Treasury Secretary from 1995 to 1999. In a letter to Mr Pandit, Mr Rubin said: “My great regret is that I and so many of us who have been involved in this industry for so long did not recognise the serious possibility of the extreme circumstances that the financial system faces today.”
Mr Rubin, who joined Citigroup in 1999, has been excoriated in the media as the force behind the bank’s decision to chase profits by pushing into risky credit-related products. His duties at the bank, other than using his network to attract clients, were not clear, but insiders said that his influence was pervasive.
In his time at Citigroup, Mr Rubin collected about $US150 million in remuneration.
Before becoming Treasury Secretary, Mr Rubin, who is a graduate of Harvard and Yale Law School, had a long career at Goldman Sachs, where he started on the arbitrage trading desk and worked his way up to become co-chairman of the elite bank.
Shares in Citigroup closed in New York at $US6.75, down by 5.7 per cent.
British rate cut awaits London investors next week
British rate cut awaits London investors next week
Market watch top headlinesAustralian reportsAust markets: Australian share market closes higherAust dollar report: Aussie dollar closes at eight-week lowAust credit close: Aussie bonds closes mixedWorld reportsWorld commodities: Oil prices mixed, gold higherWorld markets: US stocks fall sharplyStocks to watchERA, AXA, COF, OZL, ORI, HVN, TAH, REU, RAT, AFG, HGG, GNS,
LONDON, Jan 30 AFPJanuary 31 2009, 06:33AMBritain is next week braced for yet another cut in interest rates to record low levels but it may not be enough to boost the London stock market as recession weighs on the economy, traders said.
The FTSE 100 index of leading shares closed on Friday at 4,149.64 points, up 2.39 per cent or 97.17 points from a week earlier.
The Bank of England (BoE) is widely expected to slash British borrowing costs by a further 50 basis points to 1 per cent at a meeting on Thursday.Now at 1.5 per cent, interest rates are at the lowest level since the British central bank was formed in 1694.
Next week also sees earnings results from energy giant BP, telecommunications group Vodafone and pharmaceutical company GlaxoSmithKline.
This week, a statement from Barclays bank stressing it did not need a government bailout following speculation to the contrary sent its share price and those of its peers rocketing.
Some of the gains were lost as the weekend approached due to "poor earnings and bleak labour and housing market data from the US, heightening fears of a deeper global recession", said City Index market strategist Nick Serff.
"This ended a four-day surge for the major indexes, their best performance in two months," he said.
Another notable British corporate announcement this week came from Anglo-Dutch energy giant Royal Dutch Shell, which said it had made a net loss of $US2.81 billion ($A4.3 billion) in the final quarter of 2008 on plunging oil prices.
The loss compared with a net profit of $US8.47 billion ($A13 billion) during the fourth quarter of 2007, when crude prices were far higher, Europe's largest oil company said.
Market watch top headlinesAustralian reportsAust markets: Australian share market closes higherAust dollar report: Aussie dollar closes at eight-week lowAust credit close: Aussie bonds closes mixedWorld reportsWorld commodities: Oil prices mixed, gold higherWorld markets: US stocks fall sharplyStocks to watchERA, AXA, COF, OZL, ORI, HVN, TAH, REU, RAT, AFG, HGG, GNS,
LONDON, Jan 30 AFPJanuary 31 2009, 06:33AMBritain is next week braced for yet another cut in interest rates to record low levels but it may not be enough to boost the London stock market as recession weighs on the economy, traders said.
The FTSE 100 index of leading shares closed on Friday at 4,149.64 points, up 2.39 per cent or 97.17 points from a week earlier.
The Bank of England (BoE) is widely expected to slash British borrowing costs by a further 50 basis points to 1 per cent at a meeting on Thursday.Now at 1.5 per cent, interest rates are at the lowest level since the British central bank was formed in 1694.
Next week also sees earnings results from energy giant BP, telecommunications group Vodafone and pharmaceutical company GlaxoSmithKline.
This week, a statement from Barclays bank stressing it did not need a government bailout following speculation to the contrary sent its share price and those of its peers rocketing.
Some of the gains were lost as the weekend approached due to "poor earnings and bleak labour and housing market data from the US, heightening fears of a deeper global recession", said City Index market strategist Nick Serff.
"This ended a four-day surge for the major indexes, their best performance in two months," he said.
Another notable British corporate announcement this week came from Anglo-Dutch energy giant Royal Dutch Shell, which said it had made a net loss of $US2.81 billion ($A4.3 billion) in the final quarter of 2008 on plunging oil prices.
The loss compared with a net profit of $US8.47 billion ($A13 billion) during the fourth quarter of 2007, when crude prices were far higher, Europe's largest oil company said.
Saturday, October 17, 2009
Mortgage Relief: Banks agree to help homeowner battlers save their homes
While American homeowners families lose their homes to foreclosures at a rate of 10,000 homes a day, the Australian Government has negotiated with the big four Australian banks for struggling homeowners to allow up to 12 months forbearance on home loans, with the interest to capitalise on the loans,and the waiving of penalty rates.
Agreement by the banks to these requests from Treasurer Wayne Swan gets a big tick from even the most ardent bank bashers.
Maybe the long suffering American jobless homeowners will also get this kind of support, security and peace of mind, and hopefully soon.
Kevin Rudd, Australia’s Prime Minister is to announce his mortgage relief plan that will freeze mortgage payments for up to 12 months for financially stressed homeowners.
Australia's big-four banks have reached the landmark agreement to help prevent struggling families from losing their homes.
As part of a comprehensive package of assistance for working families with mortgage commitments, the Commonwealth Bank, the National Australia Bank, Westpac Banking Corporation and ANZ Bank will put a freeze on mortgage payments in hardship cases. That could mean waiving any penalty rates and fees and charges for late payments.
Banks also indicated that on other loans, including car loans, where appropriate, they would consider interest-only repayment options, and will also consider waiving fees in hardship cases. The Government's purpose in its negotiations with the banks has been clear - to ask the banks to provide maximum flexibility for borrowers suffering temporary hardship, through loss of income from work.
Kevin Rudd gave credit where credit was due and praised and thanked the banks for the goodwill they have demonstrated in this area, and gave credit to Treasurer Wayne Swan for his efforts in negotiating the agreement.
This is just another demonstration Kevin Rudd is doing such a great job at keeping the economy ticking over in a business as usual mode, underpinning property values for all of us, whilst the rest of the World struggles to get out of the global financial crisis.
Good one Kevin.
Agreement by the banks to these requests from Treasurer Wayne Swan gets a big tick from even the most ardent bank bashers.
Maybe the long suffering American jobless homeowners will also get this kind of support, security and peace of mind, and hopefully soon.
Kevin Rudd, Australia’s Prime Minister is to announce his mortgage relief plan that will freeze mortgage payments for up to 12 months for financially stressed homeowners.
Australia's big-four banks have reached the landmark agreement to help prevent struggling families from losing their homes.
As part of a comprehensive package of assistance for working families with mortgage commitments, the Commonwealth Bank, the National Australia Bank, Westpac Banking Corporation and ANZ Bank will put a freeze on mortgage payments in hardship cases. That could mean waiving any penalty rates and fees and charges for late payments.
Banks also indicated that on other loans, including car loans, where appropriate, they would consider interest-only repayment options, and will also consider waiving fees in hardship cases. The Government's purpose in its negotiations with the banks has been clear - to ask the banks to provide maximum flexibility for borrowers suffering temporary hardship, through loss of income from work.
Kevin Rudd gave credit where credit was due and praised and thanked the banks for the goodwill they have demonstrated in this area, and gave credit to Treasurer Wayne Swan for his efforts in negotiating the agreement.
This is just another demonstration Kevin Rudd is doing such a great job at keeping the economy ticking over in a business as usual mode, underpinning property values for all of us, whilst the rest of the World struggles to get out of the global financial crisis.
Good one Kevin.
Wednesday, October 14, 2009
Mortgages. Why people are dissatisfied with the banks, and why the banks don't care..
Mortgage rates may rise above any official cash rate increase, according to many banks. The Government does like it, customers don't like, but the banks don't care. They have us "by the short and curly's."
You may have read the recent report by Choice that the big banks in Australia are on the nose with their customers.
People like the fact that we have a stable banking and financial system, and that their banks have been the rock in the global financial crisis.
But I guess its something that Australians expect from their banks.
The thing that gets under our skin is that Australia's Banks are the most profitable in the World, and while we can't deny they are well run, the real reason for this is the lack of mortgage competition that Banks face in Australia.
And that will lead to the banks taking their customers for granted. And in my opinion they do just that.
The fees and charges that they have been charging us for the last ten years or so, have in fact been in my view unlawful.
But we have let them get away with it, so they get on adding them.
Building societies and credit unions on the other hand are well liked by their customers.
They treat their customers as if they owned the business, and they do. Once you have an account with a building society or credit union, you become a joint owner of that organisation.
Banks do have mission statements that make their customers 'stakeholders'. This however is often meaningless when the share prices take a hit, and the the top officers of the banks get rewarded when share prices rise. And the easiest way to do that is to make more profit on every customer.
What we need to do is to tell the banks when we are not happy, and if you are not heard, then to move your account.
More competition in the Mortgage space is required.
The Treasurer Wayne Swan has been sniping at the banks about mortgage rates, and trying to hold them to official rate rises only.
But customers making a stand and competition are the key to lower mortgage rates.
You probably didn't notice, but Australia's mortgage brokers and securitised mortgage lenders have become largely irrelevant leading up to, and during the Global Financial Crisis. They just couldn't rise the funding to remain competitive with the banks.
Wayne Swan is trying to support the securitised mortgage lenders and has just pledged a further $8 billion dollars for mortgage funding. But that is just a drop in the bucket.
We need to understand that more is required.
Mortgage competition has collapsed in Australia
Mortgage brokers have gone from 40% share to 20% share of the mortgage market, and worse, mortgage originators have fallen from around 25% to just 2.5% of the mortgage business in recent times, and that is the issue.
There is no reason for banks to worry over the next two or three years. The competition has been vanquished and there is no one on the horizon to challenge them.
So what will you do about it? Get your bank to reduce your fees, move to a building society or credit union, get your loan refinanced by a mortgage originator, or just cop it sweet?
Friday, October 09, 2009
ANZ leads the charge of the bank brigade in mortgage interest rate increase
Was it their turn to go first? No one is saying, but the ANZ lead the other three major banks in increasing their variable mortgage home loan rates by a quarter of a percent after the Reserve Bank raised the cash rate by a similar amount.
ANZ was the first of the major banks to move in late morning, the National Australia Bank following by mid afternoon, and the Commonwealth Bank and Westpac by days end.
All four banks are raising their variable mortgage home loan rate by the same amount of the official rate rise of quarter of one percent, that was announced by the RBA this week.
These same banks had recently stated that they will raise rates even without RBA official increases so I guess we should be grateful the rises were not higher.
In my view we need more competition in the Australian mortgage market. But instead we have less as most of the big non bank mortgage lenders are being gobbled up by the banks in the wake of Global Financial Crisis.
Author: Rick Adlam, Mr Mortgage
Tuesday, September 29, 2009
Do Australian house prices need US style market collapse?
Is the Australian Dream Fading away? Many believe that without a US style housing market collapse it will soon become a distant memory.
Some are saying that the Australian dream of home ownership is slipping away, leaving a threat of a US-style collapse in house prices, according to a team of university researchers from South Australia's Flinders University.
They have discovered that home ownership in the 10 years from 1996 rose only 0.8 per cent despite strong economic growth and low interest rates in that period.
The Flinders Institute for Housing, Urban and Regional Research analysis found home ownership fell by 15 per cent over the two decades to 2006 for low income earners over 45 years of age and medium-high income earners under 45 years.
Problems cited were that large gains in national income from the resources boom were "wasted" by increasing house prices and accumulating debt to unreasonable levels.
They also found the first home owners scheme boosted home purchases for people under 25 years of age, but many lower income earners in the 25-44 age bracket were unlikely to ever own their own homes because their parents were spending their inheritances and prices remained high.
We are going for either:
- A sudden price crash of 50% or more US Style
- A slow long drawn out price decline over 10 years or more Japan style.
- A massive drop in aspirations of home-ownership
The Mr Mortgage point of view.
I don't think that this tells the real housing market story, research or no. I don't have have any research papers to back up my view, but here's what I think about the housing markets.
Firstly the US collapse happened because of the bubble caused by giving home loans at unsustainable low interest rates to people with poor credit and uncertain employment. The US housing market and mortgage lending business was a train wreck waiting to happen.
That wreck happened when the bankers that set these loans could not sell them on as investments to suckers anymore.
Why Australia's Housing Market is different.
That has not happened in Australia. Australia's lending practices have balanced home buyers income security, security properly values and large equity or deposits to compensate for patchy credit histories or incomes, to ensure low default rates. [A tiny fraction of the US credit defaults]
And Australians get stuck with the debt if they walk away from the home. This keeps them in when it gets tough.
Also Americans use their home's equity like we use stolen money [they get rid of it as soon as it shows up], and they drew it up to the limit. When you do this you tend to buy cars bigger than you need, and the result is a mortgage you can't afford. That does not happen in Australia. The weather here is kinder to cars.
It should also be pointed out that the US housing market did not collapse across the board. Good quality homes in strong economic regions have held up, whereas many homes in less desirable areas has lost up to 4 times there value. Now the banks have recovered, so will home prices in many more areas. Australia's banks will not have such a collapse in my view. They don't lend and sell on dodgy mortgage loan products and did not run out over money to lend. Australian Banks don't pay each other princely bonuses for failure either.
Some people in the US refinanced up to 9 times a year. That does not happen in Australia. Yes Australians may refinance their homes and debt every few years, not 9 times a year, but they have at least 10% to 20% equity in the home after refinancing, they don't get 125% loans like many US homeowners did.
In the US the loan is on the home. If you can't afford the repayments you just walk away and send the bank the keys "Jingle Mail". Here the loan is on you, and you can't walk away.
In the US people favour the stock market for investment. Australians favour residential real estate.
Japan has a low birth rate and a low immigration rate. The economy has been in recession for decades. Australia has a high birth rate and high migration that constantly pressured home prices and since the early nineties recession has powered on from boom to boom. Australia is a very fast uptake of technology and ideas and a highly mobile population. That is a good recipe for continued growth.
Australia is an extremely well managed country, socially, economically and commercially.Yes, We haven't got everything right, and housing supply is one thing that does need to be addressed.
But housing shortages lead to price growth, not house price slumps. We don't have an oversupply problem, as in Belgium, where I understand that many homes are vacant.
Whilst Australia has limitless land, nobody wants to live in a desert, and the Outback does not have the infrastructure to take populations out of the capital cities, and regional centres and eastern coastal strip where over 90% of Australia's populations live.
This is the biggest reason that cheap housing and near universal home ownership to all comers now has become the most expensive housing in the world. Because we have not planned housing needs, we are 100,000 housing units short of what is needed. That gap is not closing.
When you have Governments constantly reducing income taxes to win elections, then there isn't the money to build Australia's Infrastructure, and renew what is there already. I am talking roads, power stations, schools, hospitals, shopping precincts, distribution centres and places of work, entertainment and recreation and sport. Not to mention water supplies, new dams and and reservoirs. Part of that money is going into house mortgage repayments instead. So saving taxes is good, but only in the short term in my view.
Also, I agree that first home owner's grants have raised home prices, because it has motivated people and provided the means to buy a home before young home buyers normally would have without addressing housing supply, including land development and infrastructure.
If we were to get things right in these areas, and be able to decentralise the population, and property prices still would not fall. People are living longer, and staying healthier, and staying in their homes longer. As peoples wealth grows they want a bigger home closer to the amenities they value. They invest in many things, but most Australians like and trust property as a wealth store. And their home is their Castle and their Keep.
Author: Rick Adlam Mr Mortgage
How to send your Australian Banks Broke
As the ANZ folded last week to pressure on penalty fees, it brings up a question. How dependent are Australia's banks on fees and charges, and how long could they avoid going under if they could no longer charge these fees, and up them at will?
Have you been caught in the ANZ money trap?
I was an angry victim of ANZ's penalty fees just last Christmas.
I have been caught several times with a $40 penalty fee from ANZ. Often these fees were subtracted on the same day that new funds hit my account, and on some of these occasions I believe that the bank had these funds for several days before declaring them. A double ripoff you might say.
But when on Holidays last Christmas I overdrew my account on a EFTPOS card by less than three hundred dollars.
The ANZ charged me over $40.00 for each time I made a draw. The first charge was on an overdraw of less than $10!
This overdrawn amount included the $120 or so "Honour fees". This meant that they charged me nearly 100% interest for a few days! The mind boggles at the actual interest charged on a per annum basis, but it would have been in the Tens of thousands percent interest annualised. As you can imagine I was not well pleased.
How I struck back at the ANZ.
When I rang the bank I pointed out this practice as wrong and I believed unlawful.
The bank officer reminded me that I had "Signed a contract" with the terms and conditions, and that I was stuck with the charges, and that it was therefore legal.
I then pointed out that any contract had to be fair and reasonable, and this obviously was neither, and therefore where I had agreed with the terms and conditions or not, it was unlawful, as it did not meet this implied condition.
I pointed out that they were entitled to charge an default interest in the order of 4% per annum, which is fair and reasonable, and that this would amount to only a few cents. Their charges i said amounted to several thousand percent per annum, and this was I believed predatory interest.
I also pointed out that I had signed nothing. I was given a booklet with the terms and conditions in then, after I signed up for a bank account, and that these charges were not clearly explained to me.
I also pointed out that I was under the impression, and had asked the bank not to allow any overdrawn amount, and because they did, it was their fault not mine, and that had a duty to me to inform me that the amount would be overdrawn and incur penalty rates if I proceeded, and this did not happen. As I had several bank accounts with clear funds in them I could have used another card.
After initially arguing with me they quickly capitulated under the weight of seeming legal argument. I received a reversal of all three honour fees.
One hundred and twenty dollars tax free for five minutes on the phone, I feel was a good investment of time.
In a move that will cost it about $140 million a year, the ANZ abolished 27 fees on personal accounts and cut other account, credit card and loan fees.
I must not have been the only person to complain, and obviously the ANZ was not the only bank to charge these fees.
But I kind of like to think that I was part of the momentum that caused this charge of heart by the ANZ.
If you were one of the ANZ customers who complained as well, thank you. We did a good thing, and saved millions from a nasty surprise.
So will the banks really go broke if they did not charge fees. Of course not. They make billions a years. But they did lose a little icing off the cake.
The ANZ bank and in fact all Australian banks are great services that we cannot live without. They are full of honest and good people. But if you let them they will try it on. Don't let them even think they can with your account.
Plus, all fees will be abolished for accounts of customers on government benefits who have an Access Basic account. If that's you, tell your bank today, and save even more.
Author: Rick Adlam Mr Mortgage
Saturday, July 25, 2009
Are Mortgage Brokers honest with home buyers and refinancing homeowners?
Mortgage brokers are in the firing line of late, and now Westpac bank and the Commonwealth bank are putting pressure on accredited mortgage brokers, telling them that if they don’t have a certain number of loans settle with them within a 6 month time frame, they will lose their accreditation with the lender.
The mortgage brokers have responded by saying that their “Independence” is in jeopardy, because many brokers will bow to the pressure and set loans for clients for the home buyers or refinancing homeowner with these lenders, rather than the best loan for the customer.
In my prior article I was a little harsh on these brokers, and this brought up the question of honesty of the Mortgage brokers.
So here is my revised take on this important topic.
The Mortgage Brokers Intent indicates his or her honesty.
Honesty should not be taken on a legal or literal definition of the relationship between the mortgage broker and the lender and the home buyer or refinanced homeowner, but on the intent of the mortgage broker when they are helping their customer select the best loan for them.
If the Mortgage Broker has the intention of always selecting the very best mortgage lender and mortgage loan product for their customer, then its obvious that the mortgage broker can be considered an honest mortgage broker.
If the Mortgage broker explains to the client that they are offering a no cost loan service to them, because the lenders are paying them a commission for introducing the loan to the lender, they are being honest with the customer in my view.
If on the other-hand the mortgage is selected favours the mortgage broker and his or her own personal interest, then the mortgage broker would have to be considered dishonest in my view.
Banks and other mortgage lenders that offer lenders inducements to put loans through them, compromise the brokers’ impartiality.
So do lenders that force lenders to have sales targets. Doing so in my view makes mortgage brokers appear commission representatives of the lender.
That has to be a bad thing for the mortgage broker industry and the customer than place their trust in a Mortgage Broker to do the right thing by them according to Mr Mortgage.
The mortgage brokers have responded by saying that their “Independence” is in jeopardy, because many brokers will bow to the pressure and set loans for clients for the home buyers or refinancing homeowner with these lenders, rather than the best loan for the customer.
In my prior article I was a little harsh on these brokers, and this brought up the question of honesty of the Mortgage brokers.
So here is my revised take on this important topic.
The Mortgage Brokers Intent indicates his or her honesty.
Honesty should not be taken on a legal or literal definition of the relationship between the mortgage broker and the lender and the home buyer or refinanced homeowner, but on the intent of the mortgage broker when they are helping their customer select the best loan for them.
If the Mortgage Broker has the intention of always selecting the very best mortgage lender and mortgage loan product for their customer, then its obvious that the mortgage broker can be considered an honest mortgage broker.
If the Mortgage broker explains to the client that they are offering a no cost loan service to them, because the lenders are paying them a commission for introducing the loan to the lender, they are being honest with the customer in my view.
If on the other-hand the mortgage is selected favours the mortgage broker and his or her own personal interest, then the mortgage broker would have to be considered dishonest in my view.
Banks and other mortgage lenders that offer lenders inducements to put loans through them, compromise the brokers’ impartiality.
So do lenders that force lenders to have sales targets. Doing so in my view makes mortgage brokers appear commission representatives of the lender.
That has to be a bad thing for the mortgage broker industry and the customer than place their trust in a Mortgage Broker to do the right thing by them according to Mr Mortgage.
Friday, July 24, 2009
Mortgage Brokers: who do they work for, their customers or the Bank?
As Australia’s major banks are putting the squeeze on mortgage brokers to extract more deals out them, we need to ask the question “Do mortgage brokers work for the benefit of their client or the Banks? You may not like the answer.
Mortgage brokers can’t get you a loan for a lender that they are not accredited for. And right now Westpac and the Commonwealth Banks are starting to make brokers jump through performance hoops, in order to retain their accreditation's with them.
The false assumption
How can that be you might ask?
That's easy. Determine who the principal is and who the client is and who the customer is. A principal in an agency is easy to spot.
They are the one who pays the agent.
Who is the customer?
Easy they are the ones who buy the product or service from the agent.
Who is the client then you might ask? Good question!
It can’t be the customer, because in the relationship, the customer is the one who pays for the goods or services.The client pays the agent for bringing buyers and seller together. When a home buyer pays all the money to the lender, and the lender pays the broker, then the client in my view is the Bank!
Why do I say this? Because the mortgage broker is paid by the banks, not the client.
So the mortgage broker is dependent on the Bank or Non-bank Mortgage Lender for his livelihood.
Mortgage brokers can’t get you a loan for a lender that they are not accredited for. And right now Westpac and the Commonwealth Banks are starting to make brokers jump through performance hoops, in order to retain their accreditation's with them.
The false assumption
Some in the mortgage broking industry claim that their “Independence” as a mortgage broking professional is in jeopardy due the pressure put to them by the major banks. This assumes that the mortgage broker is independent of the banks. This in my view is a false assumption.What is more, if any mortgage broker claims to their client that they are “Independent”, they are guilty of deception and misleading the client by making fraudulent statements.
How can that be you might ask?
That's easy. Determine who the principal is and who the client is and who the customer is. A principal in an agency is easy to spot.
They are the one who pays the agent.
Who is the customer?
Easy they are the ones who buy the product or service from the agent.
Who is the client then you might ask? Good question!
It can’t be the customer, because in the relationship, the customer is the one who pays for the goods or services.The client pays the agent for bringing buyers and seller together. When a home buyer pays all the money to the lender, and the lender pays the broker, then the client in my view is the Bank!
Why do I say this? Because the mortgage broker is paid by the banks, not the client.
So the mortgage broker is dependent on the Bank or Non-bank Mortgage Lender for his livelihood.
IMHO no mortgage broker can claim to be independent of the banks, unless they
charge a fee from the customer [borrower] and reimburse all commissions [paid to
them by the bank] to the customer.
Mortgage brokers do the opposite. They are completely dependent on the Bank.
Mortgage Brokers also have to ensure that they look after the best interest of the lender.
Can you see anything wrong in this?
Yes, the mortgage broker appears in fact a [non-exclusive] commission agent of the bank.
He or she only gets paid if they bring a deal to the lender that settles.
The banks of course will argue that “No”; they don’t employ the broker as an agent. He or she is merely an introducer to the lender.
If, just for the moment, we take a look at Real Estate Agents and their relationships with buyers and vendors of property we can see that the real estate agents principal is the vendor [seller], because [in most situations in Australia] the seller is the one who hires the agent to effect the sales, and the seller also pays the commission on success to the real estate agent.
Real estate agents in effect work for the seller to market and sell them property on the seller’s behalf. They have the skills and knowledge to get the best possible price in a given market to affect a good outcome for the seller.
What is the difference with a bank hiring a mortgage broker to sell their loans? I can’t see any. Maybe I have missed something in the home loan or real estate business, so if I have please explain it to me. Until that happens [I’ve been waiting eight years now] I am convinced otherwise. And I will stick with my long held view, that mortgage brokers are the agents of the banks that they represent.And that brings up a question, and the question is this. What’s wrong with that? Nothing I say. As long as the client is made explicitly aware of this fact, by the broker in a statement, or in writing, before transacting a loan.
Mortgage Brokers get angry when you tell them this.
This notion will rile the many honest brokers who work hard to get the best deal they can for their client. But that is not the point. Yes, most brokers are honest, and will work to get the best loans for their customer [let’s stop calling them clients, OK in case we give someone the wrong impression.But that is not the point. The point is they don’t have to be honest. They can if they wish sell the customer a worse than optimum loan for their needs. We have all heard of brokers who hire sales people and tell them to sell a particular loan, when they know that this is not best loan or outcome for the client, but benefits the mortgage broker instead.
What is needed is legislation that clears the air on these points so that customers know where they stand on this point, and who is the mortgage broker really working for. Any Mortgage Broker that tells you that he or she is independent, should be given a wide berth, or reported to the Office of Fair Trading as far as I am concerned.
Are Mortgage Brokers Honest?
The notion that mortgage brokers will lose their independence if the banks make them sell a certain number of loans is rubbish. To use the real estate agent analogy again, if you give the agency to a real estate agent, who then uses your home as a way to sell other people’s homes instead of yours, is he or she being honest with you, the client and principal? And can you sack the agent if they don’t perform? Of course you can!Mortgage brokerage need to take a good look at themselves, and start being more honest with their customers, and maybe they need to start with themselves and the relationships with their lending panel.The final question about honesty is what is implied in a name. Does broker imply an agent client relationship? If it does maybe it should be replaced with Mortgage Introducer. That is a more honest name in the opinion of Mr Mortgage.
Wednesday, July 08, 2009
First time home buyers record boosts Australia's confidence
In Australian Rules Football a team down on it's confidence can be sparked into life by a daring feat followed by an unlikely goal. Well it looks like first home buyers have been given the confidence to act in the shape of the extended First Home Owners Grant, and they in turn have passed the ball to other players in the Australian economy.
In the face of a global recession, and flat real estate prices, the treat of job losses increasing later this year they have kicked a goal in the form a record in numbers of first time.
This act of courage can only lift the confidence of other Australians and give them heart to set aside their concerns and get on with it, whatever that "it" may be.
In fact on the back of this, and the financial support that has been handed to all Australians that need it most by the Rudd Government, Australians’ confidence in the future have risen its best level in nearly two years.
In turn Australians have set record retail spending figures over the last few weeks. With major infrastructure works that the Government has planned to yet come on stream and with major trading partner China recovering faster that expected, Australia just may miss this whole Global recession thing all together.
Those that control the levers of power in Australia seem to have a grip on what to do next. They include Kevin Rudd, Wayne Swan, the Reserve Bank of Australia, and the Treasury public servants. Good on 'em!
Lets hope there are other players in Australia's economy who can go out against the odds and kick some more goals.
Rick Adlam is Mr Mortgage
In the face of a global recession, and flat real estate prices, the treat of job losses increasing later this year they have kicked a goal in the form a record in numbers of first time.
This act of courage can only lift the confidence of other Australians and give them heart to set aside their concerns and get on with it, whatever that "it" may be.
In fact on the back of this, and the financial support that has been handed to all Australians that need it most by the Rudd Government, Australians’ confidence in the future have risen its best level in nearly two years.
In turn Australians have set record retail spending figures over the last few weeks. With major infrastructure works that the Government has planned to yet come on stream and with major trading partner China recovering faster that expected, Australia just may miss this whole Global recession thing all together.
Those that control the levers of power in Australia seem to have a grip on what to do next. They include Kevin Rudd, Wayne Swan, the Reserve Bank of Australia, and the Treasury public servants. Good on 'em!
Lets hope there are other players in Australia's economy who can go out against the odds and kick some more goals.
Rick Adlam is Mr Mortgage
Australian federal government to take over consumer credit regulation
Will the Fed abolish interest-rate caps on pay day lenders?
Many feel that scrapping interest rate caps will leave low-income earners vulnerable to rip-off interest rates.State-based rate caps that stop lenders charging exorbitant interest are likely to disappear once the Federal Government takes over regulation of consumer credit, raising concern about the impact on low-income borrowers who have no choice but to use high-cost "fringe" lenders.
The Federal Government is expected to rely on its "responsible lending" laws, due to take effect from November, rather than maintaining the interest-rate caps that apply in NSW, the ACT, Victoria and Queensland.
There seems to be a presumption that a Labor Government will dismiss the important protective measure of capped interest rates out of hand.
In my opinion is this pure speculation, and I am confident that the social justice values of the Labor party will shine through, and any changes required to the Legislation will be made to protect the most venerable in our society short term credit to struggling low income earners is a high risk business, where both the capital and the interest are at risk.
So it is expected that these loans charge a higher interest rate.On the other hand, even a high interest rate is not enough to offset the risk, and fees and charges, that increase on defaults, should be part of the compensation mix.
These loans are usually small, and are usually paid within a month or so, a higher interest rate is not a burden. They become a burden when the interest rate balloons and the borrower cannot repay, said Mr Mortgage. "So yes, there needs to be room for hardship rules to govern the conduct of payday lenders."
Teresa Wilson, who chairs the Australian Microfinance Network. says "The Government has indicated that it's not keen on interest-rate capping, apparently because here will be a “responsible-lending requirement” attached to credit contracts and I think it's relying on that to minimise exploitative lending practices.
Teresa feels that the Government needs to look closer at using an interest rate cap as part of the responsible lending law.
Mr Mortgage says “that as long as the borrower has free access to the Courts to claim financial hardship, then the Government may be enough to protect low income earners and pensioners. On the other-hand, if course actions were to become wide spread these actions could clog the courts and legal system and only the lawyers would benefit.”
“Also, Teresa has not mentioned pawnbrokers, and these seem to be able to lend at higher rates and not be affected by credit laws” To me this is a big loophole that needs to be addressed.
"Low-income earners, unable to access credit from mainstream lenders because of "rigid" lending criteria, have little option but to pay high rates if they need a short-term loan to cover a large energy bill or to replace a broken-down fridge, " Teresa Wilson says.
The situation is no better or worse as mainstream lenders tighten their criteria in the wake of the credit crunch, she says. That's because credit assessments are based purely on income rather than looking more broadly at ways to help them. "It has been demonstrated that people on low incomes can repay loans as long as the loan product is structured so as not to set them up for failure," Wilson says, adding that it requires reasonable interest rates, reasonable repayment schedules and some flexibility in the product."
"It's about looking at capacity to pay in a real sense and structuring the product so it's affordable," she says.
I think that we all need to realise that predatory lending practices that caught so many home buyers in the US , have led to the failure and closure or merger of many banks and mortgage lenders in the US.
In Australia we are better than that. Any contract has to face a fairness test. On that point alone any predatory loan would fail, be unlawful and as such unenforceable at law. The Problem is that most people are unaware of this.” Says Mr Mortgage.
A National Australia Bank project that is testing what the break-even rate for small loans really is say its 28%, about the rate of so called “interest free loans”.
One thing that can be agreed is that yes, we need small loan and cash flow lenders and payday lenders, because they serve a necessary function. What we don’t need fringe lenders who are charging annual interest rates up to 240 percent and up to 480 percent are preying on people who can least afford to repay. We hope that Ms Wilson's concerns are addressed for the sake of borrowers of small loans.
Many feel that scrapping interest rate caps will leave low-income earners vulnerable to rip-off interest rates.State-based rate caps that stop lenders charging exorbitant interest are likely to disappear once the Federal Government takes over regulation of consumer credit, raising concern about the impact on low-income borrowers who have no choice but to use high-cost "fringe" lenders.
The Federal Government is expected to rely on its "responsible lending" laws, due to take effect from November, rather than maintaining the interest-rate caps that apply in NSW, the ACT, Victoria and Queensland.
There seems to be a presumption that a Labor Government will dismiss the important protective measure of capped interest rates out of hand.
In my opinion is this pure speculation, and I am confident that the social justice values of the Labor party will shine through, and any changes required to the Legislation will be made to protect the most venerable in our society short term credit to struggling low income earners is a high risk business, where both the capital and the interest are at risk.
So it is expected that these loans charge a higher interest rate.On the other hand, even a high interest rate is not enough to offset the risk, and fees and charges, that increase on defaults, should be part of the compensation mix.
These loans are usually small, and are usually paid within a month or so, a higher interest rate is not a burden. They become a burden when the interest rate balloons and the borrower cannot repay, said Mr Mortgage. "So yes, there needs to be room for hardship rules to govern the conduct of payday lenders."
Teresa Wilson, who chairs the Australian Microfinance Network. says "The Government has indicated that it's not keen on interest-rate capping, apparently because here will be a “responsible-lending requirement” attached to credit contracts and I think it's relying on that to minimise exploitative lending practices.
Teresa feels that the Government needs to look closer at using an interest rate cap as part of the responsible lending law.
Mr Mortgage says “that as long as the borrower has free access to the Courts to claim financial hardship, then the Government may be enough to protect low income earners and pensioners. On the other-hand, if course actions were to become wide spread these actions could clog the courts and legal system and only the lawyers would benefit.”
“Also, Teresa has not mentioned pawnbrokers, and these seem to be able to lend at higher rates and not be affected by credit laws” To me this is a big loophole that needs to be addressed.
"Low-income earners, unable to access credit from mainstream lenders because of "rigid" lending criteria, have little option but to pay high rates if they need a short-term loan to cover a large energy bill or to replace a broken-down fridge, " Teresa Wilson says.
The situation is no better or worse as mainstream lenders tighten their criteria in the wake of the credit crunch, she says. That's because credit assessments are based purely on income rather than looking more broadly at ways to help them. "It has been demonstrated that people on low incomes can repay loans as long as the loan product is structured so as not to set them up for failure," Wilson says, adding that it requires reasonable interest rates, reasonable repayment schedules and some flexibility in the product."
"It's about looking at capacity to pay in a real sense and structuring the product so it's affordable," she says.
I think that we all need to realise that predatory lending practices that caught so many home buyers in the US , have led to the failure and closure or merger of many banks and mortgage lenders in the US.
In Australia we are better than that. Any contract has to face a fairness test. On that point alone any predatory loan would fail, be unlawful and as such unenforceable at law. The Problem is that most people are unaware of this.” Says Mr Mortgage.
A National Australia Bank project that is testing what the break-even rate for small loans really is say its 28%, about the rate of so called “interest free loans”.
One thing that can be agreed is that yes, we need small loan and cash flow lenders and payday lenders, because they serve a necessary function. What we don’t need fringe lenders who are charging annual interest rates up to 240 percent and up to 480 percent are preying on people who can least afford to repay. We hope that Ms Wilson's concerns are addressed for the sake of borrowers of small loans.
Saturday, July 04, 2009
Australian Banks play hardball to remain profitable
Be in no doubt. Australia’s big four Banks will tough out any criticism from the Prime Minister and Treasurer down to keep their profits at record highs, financial crisis or no financial crisis.
The case in point is that mortgagor homeowners are suffering more than they should because in the last eight months, the Reserve Bank has cut official interest rates by 425 basis points and our banks have passed on only 385 basis points.
A stable and secure banking is important to support the Australian economy, jobs, business activity and investment, our banks need to ensure they remain well-run and profitable, even if that means making unpopular decisions, says Australian Bankers' Association chief executive David Bell.
But the reality is that the strong Australian economy has protected the banks from the World financial crisis, because mortgage borrowers have kept their jobs and not become bad debts on mass for the banks, which in turn would have crippled the banks as their security would not have matched their loans outstanding.
The banks seem to think they are the saviours here, and are increasing their margins at the expense of their customers, says Rick Adlam from Mr Mortgage. Independent economists and commentators agree that Australia is weathering the current global economic downturn better than any other advanced economy. What has that got to do with the Banks? They seem to want to take credit where credit isn't due.
The IMF is predicting a 1.4 per cent contraction for the Australian economy which compares very favourably with the US economy, which is expected to slide by 3 per cent, and Britain which is expected to contract by 4.1 per cent. Forecasters and commentators also agree that the stability and security of Australia's banking system has played an important part in our economy's resilience, but the banks seem to want to overplay this into a self backslapping exercise. They may have played some part, but they were not the core reason. In fact the Banks that have got into trouble were the one's who bought into valueless US mortgage derivatives, offloaded by wobbly US Banks! That's why we are not getting the full benefit of the official RBA rate cuts.
And it's not the only recent crisis in which Australia has fared well.Just a year ago there were around 20 AA-rated banks in the world. Today, there are just eight and Australia has four of them - not a bad result when our country is just 2 per cent of the world economy. Australian Banks need to continue to make sound commercial decisions to ensure the long-term stability of Australia's banking system, which is in the interests of customers, shareholders and the Australian economy. This is not aligned with increased profits that they are reporting.
They don’t need to be increasing their profit margins in a recession at the expense of their customer base and especially high debt carriers like mortgage borrowers, says Rick Adlam at Mr Mortgage. And their needs to be a level playing field for the small regional banks and non bank mortgage lenders.
The case in point is that mortgagor homeowners are suffering more than they should because in the last eight months, the Reserve Bank has cut official interest rates by 425 basis points and our banks have passed on only 385 basis points.
A stable and secure banking is important to support the Australian economy, jobs, business activity and investment, our banks need to ensure they remain well-run and profitable, even if that means making unpopular decisions, says Australian Bankers' Association chief executive David Bell.
But the reality is that the strong Australian economy has protected the banks from the World financial crisis, because mortgage borrowers have kept their jobs and not become bad debts on mass for the banks, which in turn would have crippled the banks as their security would not have matched their loans outstanding.
The banks seem to think they are the saviours here, and are increasing their margins at the expense of their customers, says Rick Adlam from Mr Mortgage. Independent economists and commentators agree that Australia is weathering the current global economic downturn better than any other advanced economy. What has that got to do with the Banks? They seem to want to take credit where credit isn't due.
The IMF is predicting a 1.4 per cent contraction for the Australian economy which compares very favourably with the US economy, which is expected to slide by 3 per cent, and Britain which is expected to contract by 4.1 per cent. Forecasters and commentators also agree that the stability and security of Australia's banking system has played an important part in our economy's resilience, but the banks seem to want to overplay this into a self backslapping exercise. They may have played some part, but they were not the core reason. In fact the Banks that have got into trouble were the one's who bought into valueless US mortgage derivatives, offloaded by wobbly US Banks! That's why we are not getting the full benefit of the official RBA rate cuts.
And it's not the only recent crisis in which Australia has fared well.Just a year ago there were around 20 AA-rated banks in the world. Today, there are just eight and Australia has four of them - not a bad result when our country is just 2 per cent of the world economy. Australian Banks need to continue to make sound commercial decisions to ensure the long-term stability of Australia's banking system, which is in the interests of customers, shareholders and the Australian economy. This is not aligned with increased profits that they are reporting.
They don’t need to be increasing their profit margins in a recession at the expense of their customer base and especially high debt carriers like mortgage borrowers, says Rick Adlam at Mr Mortgage. And their needs to be a level playing field for the small regional banks and non bank mortgage lenders.
Credit Cards: CommBank launches the first prepaid travel card
Commonwealth Bank last week launched the first multiple currency prepaid travel card.
AUstralia's Commonwealth Bank, in conjunction with MasterCard, launched the Travel Money Card last week, the first prepaid travel card that enables travellers to lock in the exchange rate of up to six prominent currencies on one card, providing anyone who travels with a highly convenient, cost effective and secure way of spending and accessing money overseas.
Available at any Commonwealth Bank branch in Australia, the Travel Money Card is accepted at more than 28 million locations worldwide, including more than one million ATMs, wherever MasterCard is accepted.
Commonwealth Bank Executive General Manager, Retail Products, Mr Michael Cant, said the card would change the way people transact while travelling.
"We are committed to offering products and services that make banking easy for our customers. The Travel Money Card is cost effective, accessible throughout the world and has the flexibility to load and transfer between multiple currencies, which has never been seen before," Mr Cant said.
"The Travel Money Card can be loaded with US dollars, British pounds, Euros, Australian, New Zealand and Canadian dollars so people don't have the hassle of changing money at their destination and can better manage their spending given the card is prepaid and the currency locked in.
"This is a great option for anyone who travels, from backpackers, business and seasoned travellers, or parents preparing their children for their first travel experience," He said.
Mr Eddie Grobler, executive vice president, MasterCard Australasia said that the Travel Money Card provides a global payment solution while travelling.
"MasterCard prides itself on offering its customers convenience and peace of mind when it comes to travelling internationally, and that benefit is now extended to Commonwealth Bank Travel Money Card customers.
"A world first for MasterCard, travellers can now access multiple currencies on the single card and know the card will be accepted across MasterCard's vast global network," Mr Grobler said.
The Travel Money Card enables people to avoid fluctuating exchange rates, international transaction fees and keep track of their spending with 24/7 phone and online support and via SMS alerts. The card attracts a flat ATM withdrawal fee. There is no fee when using the card in-store, online or over the phone, at Point of Sale (POS) merchants, and transferring between currencies on the card does not attract a fee.
Other features of Commonwealth Bank's Travel Money Card include:
*Customers can load their preferred value up to AUD$25,000 or foreign currency equivalent
* Valid for up to three years and reloadable online via BPAY, over the phone, or in any Commonwealth Bank branch in Australia
* PIN protected and signature enabled
* Back-up card provided in case card is lost or stolen. The card is not linked to a personal bank account
* Flat purchase fee of AUD$15.00
* ATM withdrawal fee of AUD$3.50 or foreign currency equivalent
* Users can keep track of their spending from anywhere in the world with support online, over the phone and via SMS alerts
* Those purchasing the card do not have to be an existing Commonwealth Bank customer.
Story from Rick Adlam Mr Mortgage, supplied by the CBA
AUstralia's Commonwealth Bank, in conjunction with MasterCard, launched the Travel Money Card last week, the first prepaid travel card that enables travellers to lock in the exchange rate of up to six prominent currencies on one card, providing anyone who travels with a highly convenient, cost effective and secure way of spending and accessing money overseas.
Available at any Commonwealth Bank branch in Australia, the Travel Money Card is accepted at more than 28 million locations worldwide, including more than one million ATMs, wherever MasterCard is accepted.
Commonwealth Bank Executive General Manager, Retail Products, Mr Michael Cant, said the card would change the way people transact while travelling.
"We are committed to offering products and services that make banking easy for our customers. The Travel Money Card is cost effective, accessible throughout the world and has the flexibility to load and transfer between multiple currencies, which has never been seen before," Mr Cant said.
"The Travel Money Card can be loaded with US dollars, British pounds, Euros, Australian, New Zealand and Canadian dollars so people don't have the hassle of changing money at their destination and can better manage their spending given the card is prepaid and the currency locked in.
"This is a great option for anyone who travels, from backpackers, business and seasoned travellers, or parents preparing their children for their first travel experience," He said.
Mr Eddie Grobler, executive vice president, MasterCard Australasia said that the Travel Money Card provides a global payment solution while travelling.
"MasterCard prides itself on offering its customers convenience and peace of mind when it comes to travelling internationally, and that benefit is now extended to Commonwealth Bank Travel Money Card customers.
"A world first for MasterCard, travellers can now access multiple currencies on the single card and know the card will be accepted across MasterCard's vast global network," Mr Grobler said.
The Travel Money Card enables people to avoid fluctuating exchange rates, international transaction fees and keep track of their spending with 24/7 phone and online support and via SMS alerts. The card attracts a flat ATM withdrawal fee. There is no fee when using the card in-store, online or over the phone, at Point of Sale (POS) merchants, and transferring between currencies on the card does not attract a fee.
Other features of Commonwealth Bank's Travel Money Card include:
*Customers can load their preferred value up to AUD$25,000 or foreign currency equivalent
* Valid for up to three years and reloadable online via BPAY, over the phone, or in any Commonwealth Bank branch in Australia
* PIN protected and signature enabled
* Back-up card provided in case card is lost or stolen. The card is not linked to a personal bank account
* Flat purchase fee of AUD$15.00
* ATM withdrawal fee of AUD$3.50 or foreign currency equivalent
* Users can keep track of their spending from anywhere in the world with support online, over the phone and via SMS alerts
* Those purchasing the card do not have to be an existing Commonwealth Bank customer.
Story from Rick Adlam Mr Mortgage, supplied by the CBA
Tuesday, June 02, 2009
Will Australia avoid the World recession and swine flu come out stronger?
What happened to the Recession and Swine Flu?
Banks and other mortgage lenders, first home buyers and retailers and all rejoicing as Australia appears to have escaped the recession that has swept the World and the dreaded Swine Flu in a single bound!
Swine Flu reported numbers are falling and without a single fatality, and the Reserve Bank of Australia deciding to leave interest rates unchanged at 3 per cent, when the board met today at its June Meeting.
The Rudd government must be dancing in the corridors of Parliament house this afternoon. Expect them to make the Liberal opposition pay now for its criticism of the stimulus package handouts, and First Home Owners Grant boost, which saved the building industry from decline and job losses. The Retail industry must also be thankful as the stimulus reaped them a record April shopping spree. Things are looking good.
The decision to keep interest rates at its 45-year low is good news for the housing industry, home buyers and mortgage lenders because there is money to throw at any weakness the RBA board sees later in the year.
In a statement released this afternoon, Reserve Bank governor Glenn Stevens said there was evidence emerging the global economy is stabilising.
"The turnaround is clearest in China and some other emerging countries," he said.
"Recovery in the major countries is likely to take longer to begin and be slower when it does occur."
Mr Stevens said although the effect of low mortgage rates was yet to be seen, future rate cuts were possible if the economy continued to deteriorate.
"The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed."
The Reserve Bank cut the official cash rate by 25 basis points in April ending 425 basis points worth of reductions since September.
The central bank has since indicated it is in no rush to lower rates further as it assesses the impact of its easier monetary policy stance and the Federal Government's stimulus packages.
The stimulus packages have worked their magic and have lifted the retail industry, with figures out yesterday showing consumers spending a record $19.4 billion shopping in April.
Banks and other mortgage lenders, first home buyers and retailers and all rejoicing as Australia appears to have escaped the recession that has swept the World and the dreaded Swine Flu in a single bound!
Swine Flu reported numbers are falling and without a single fatality, and the Reserve Bank of Australia deciding to leave interest rates unchanged at 3 per cent, when the board met today at its June Meeting.
The Rudd government must be dancing in the corridors of Parliament house this afternoon. Expect them to make the Liberal opposition pay now for its criticism of the stimulus package handouts, and First Home Owners Grant boost, which saved the building industry from decline and job losses. The Retail industry must also be thankful as the stimulus reaped them a record April shopping spree. Things are looking good.
The decision to keep interest rates at its 45-year low is good news for the housing industry, home buyers and mortgage lenders because there is money to throw at any weakness the RBA board sees later in the year.
In a statement released this afternoon, Reserve Bank governor Glenn Stevens said there was evidence emerging the global economy is stabilising.
"The turnaround is clearest in China and some other emerging countries," he said.
"Recovery in the major countries is likely to take longer to begin and be slower when it does occur."
Mr Stevens said although the effect of low mortgage rates was yet to be seen, future rate cuts were possible if the economy continued to deteriorate.
"The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed."
The Reserve Bank cut the official cash rate by 25 basis points in April ending 425 basis points worth of reductions since September.
The central bank has since indicated it is in no rush to lower rates further as it assesses the impact of its easier monetary policy stance and the Federal Government's stimulus packages.
The stimulus packages have worked their magic and have lifted the retail industry, with figures out yesterday showing consumers spending a record $19.4 billion shopping in April.
Thursday, May 21, 2009
Property dives but first time home buyers think 'It's a good time to buy.'
Hopeful first-time home buyers think it is a good time to buy their first property despite prices falling 1.7pc in April. Around 57pc of people hoping to get on to the property ladder said they thought house prices would either stay the same or increase during the coming 12 months, while 69pc thought now was a good time to buy, even though the facts say otherwise.
One in five first-time buyers even said they thought it would be more difficult to buy their first home in a year's time, viewing the current market as a window of opportunity for people with a substantial deposit.
The group said the shortage of buyers able to get a mortgage and the increase in forced sellers meant that some first-time buyers had been able to purchase properties at 25pc less than their peak price.
The optimism comes as the Halifax said that house prices in Britain fell by a bigger-than-expected 1.7pc in April and by 17.7 pc in the three months to April compared with a year earlier.
Miles Shipside of Rightmove said: "It's a clear sign that the mood is swinging from negative to positive when first-time buyers are looking to re-enter the market. Canny investors have been snapping up some bargains, and now first-time buyers reckon prices are reaching a floor too."Some will be frustrated by the size of deposit that lenders are demanding to get the best mortgage deals, however.
The majority of lenders continue to require a 40pc deposit in order for borrowers to qualify for their best deals, and there is very little choice for people with only a 10pc down payment.However, competition in the mortgage market has been increasing in recent weeks for people looking to borrow 75pc or 80pc of their home's value.Mr Shipside urged lenders to take the plight of first-time buyers seriously and offer more loans to people with smaller deposits.
Six out of 10 people hoping to buy their first property are currently renting privately, with 30pc living with their parents and 6pc in council or local authority accommodation.
Four out of 10 potential first-time buyers said they would consider buying a property through a shared ownership scheme.
One in five first-time buyers even said they thought it would be more difficult to buy their first home in a year's time, viewing the current market as a window of opportunity for people with a substantial deposit.
The group said the shortage of buyers able to get a mortgage and the increase in forced sellers meant that some first-time buyers had been able to purchase properties at 25pc less than their peak price.
The optimism comes as the Halifax said that house prices in Britain fell by a bigger-than-expected 1.7pc in April and by 17.7 pc in the three months to April compared with a year earlier.
Miles Shipside of Rightmove said: "It's a clear sign that the mood is swinging from negative to positive when first-time buyers are looking to re-enter the market. Canny investors have been snapping up some bargains, and now first-time buyers reckon prices are reaching a floor too."Some will be frustrated by the size of deposit that lenders are demanding to get the best mortgage deals, however.
The average first-time buyer questioned had £31,650 saved for a deposit, the
equivalent of around 20pc of the average house price in England and Wales.
The majority of lenders continue to require a 40pc deposit in order for borrowers to qualify for their best deals, and there is very little choice for people with only a 10pc down payment.However, competition in the mortgage market has been increasing in recent weeks for people looking to borrow 75pc or 80pc of their home's value.Mr Shipside urged lenders to take the plight of first-time buyers seriously and offer more loans to people with smaller deposits.
The British aspiration of property ownership remains high and"We need to think about the long-term effects of the continuing mortgage famine and current lending policies." Around 62pc of first-time buyers are planning to buy a property with their partner, while 33pc are buying on their own and 5pc are buying with friends or family.
aspiring first-time buyers cannot be condemned to renting forever.
Six out of 10 people hoping to buy their first property are currently renting privately, with 30pc living with their parents and 6pc in council or local authority accommodation.
Four out of 10 potential first-time buyers said they would consider buying a property through a shared ownership scheme.
Mortgages: UK bank Lloyds offers new lifeline to first-time buyers with 95pc loan with a hook
First-time buyers will need a deposit of only five percent [plus costs] if they take out a new mortgage just announced by Lloyds TSB. But maybe this is a hot air offer, because first home buyers will also need mum and dad to put up a 20 percent lien. [How many parents do you know with a big slab of idle money?] First home buyers are a valuable part of the market mix, as first home buyers help on average four homes to change hands in a domino effect.Home loans for 95 percent of the property value have been virtually unobtainable recently as lenders responded to the economic crisis by tightening lending criteria, and anticipating property value slides. This period of uncertainty is not over.The new mortgage, called Lend a Hand, offers a three-year fixed rate of 4.39 percent. As mentioned, borrowers will need their parents to deposit a sum equal to an additional 20 percent of the property value in a savings account with the bank. This money will not be accessible until the outstanding loan falls below 90 percent of the property value.And even worse for Mum and Dad, what happens to the money if their kids can’t meet the mortgage repayments? The savings account will pay a competitive fixed interest rate of 3.5 percent. Although the bank will take a legal charge on the savings account, the parents retain ownership of their savings.Lloyds TSB said "If, at the end of the deal, the combination of mortgage repayments and rising house prices has moved the mortgage from 95 percent to 90 percent of the property value, the legal charge on the savings account can be removed and the first time buyer can operate their mortgage account independently, either on Lloyds TSB's standard variable rate, by switching products or remortgaging."Borrowers would save almost £100 a month by comparison with the industry's average rate for a 90 percent mortgage of 5.98 percent, the bank added.Stephen Noakes, commercial director of mortgages at Lloyds Banking Group, said: "First-time buyers are essential to returning the housing market back to good health because every first-time buyer helps, on average, four other households move."As the UK's largest mortgage lender we're committed to help first-time buyers onto the housing ladder and this includes finding innovative ways to lower the first rung so that it is within reach for more people.He added: "Market conditions mean virtually no 95 percent loan to value mortgages are available at the moment, while the few that are come at a high price with stringent credit requirements."The legal charge on the parents' savings account means we can offset the risk of lending at this level to offer a realistic and affordable option for first time buyers. It also gives parents a way of helping their children without actually having to write the cheque."The new loan charges a fee of £995.
If you are a Llyods banker, it gets better all the time.
If you are a Llyods banker, it gets better all the time.
home loan and mortgage refi rise on low interest rates
Mortgage Bankers Assoc says home loan activity on the rise with mortgage refinance leading the way on the back of low interest rates.
Lower interest rates appear to be luring more homeowners to the table to refinance.
The number of mortgage applications rose by a seasonally adjusted 2.3 percent for the week ended May 15, according to the Mortgage Bankers Association.
The Market Composite Index, a measure of mortgage loan application volume, rose to 915.9 from 895.6 one week earlier.The Refinance Index increased 4.5 percent, to 4,794.4 from 4,588.6 the previous week.
The refinance share of mortgage activity increased to 73.6 percent of total applications from 71.9 percent the previous week.
The average interest rate for 30-year fixed-rate mortgages decreased to 4.69 percent from 4.76 percent, with points decreasing to 1.13 from 1.18.The average interest rate for 15-year fixed-rate mortgages decreased to 4.44 percent from 4.5 percent, with points decreasing to 1.01 from 1.08.The average interest rate for one-year adjustable rate mortgages decreased to 6.38 percent from 6.41 percent, with points decreasing to 0.1 from 0.11.
Lower interest rates appear to be luring more homeowners to the table to refinance.
The number of mortgage applications rose by a seasonally adjusted 2.3 percent for the week ended May 15, according to the Mortgage Bankers Association.
The Market Composite Index, a measure of mortgage loan application volume, rose to 915.9 from 895.6 one week earlier.The Refinance Index increased 4.5 percent, to 4,794.4 from 4,588.6 the previous week.
The refinance share of mortgage activity increased to 73.6 percent of total applications from 71.9 percent the previous week.
The average interest rate for 30-year fixed-rate mortgages decreased to 4.69 percent from 4.76 percent, with points decreasing to 1.13 from 1.18.The average interest rate for 15-year fixed-rate mortgages decreased to 4.44 percent from 4.5 percent, with points decreasing to 1.01 from 1.08.The average interest rate for one-year adjustable rate mortgages decreased to 6.38 percent from 6.41 percent, with points decreasing to 0.1 from 0.11.
Credit card cash advances and EFTPOS use rise in Australia
Credit card transactions, climbed nearly 10 per cent in March, according to the Reserve Bank of Australia (RBA).
Australians spent $18.775 billion on their credit and charge cards in May, up from $17.130 billion the previous month and the second straight monthly increase.
The good news is that the increase in spending was matched by increased repayments, the RBA's says.
Credit-card repayments rose 17.5 per cent in March to $19.720 billion - the highest level since December.
Australians are paying out their credit cards
Total credit and charge-card balances outstanding fell by 1.0 per cent to $44.358 billion, from $44.799 billion in February.
Balances accruing interest rose slightly to $32.689 billion in March, from $32.651 billion the previous month.
By value, credit and charge card purchases increased 9.7 per cent to $17.741 billion in March, from $16.167 billion in February.
A disturbing trend is that cash advances on credit and charge cards increased by 7.4 per cent to $1.034 billion in March, from $963 million in February.
The number of cash advances on credit and charge cards rose by 6.8 per cent in the month.
The number of credit and charge accounts increased by 11,000 in March, while the number of purchases using credit cards rose by 13.3 per cent.
Total credit and charge card balances outstanding rose by 4.3 per cent over the past 12 months, compared with an average of 12.6 per cent over the preceding five years.
Total credit card repayments rose by 11.6 per cent over the past 12 months, compared with an average of 9.2 per cent over the preceding five years.
Total EFTPOS purchases rose to 161.998 million worth $11.213 billion in March, compared with 146.722 million worth $9.912 billion in the previous month.
The value of EFTPOS purchases rose by 18.7 per cent over the past 12 months, compared with an average of 12.3 per cent over the preceding five years.
Australians spent $18.775 billion on their credit and charge cards in May, up from $17.130 billion the previous month and the second straight monthly increase.
The good news is that the increase in spending was matched by increased repayments, the RBA's says.
Credit-card repayments rose 17.5 per cent in March to $19.720 billion - the highest level since December.
Australians are paying out their credit cards
Total credit and charge-card balances outstanding fell by 1.0 per cent to $44.358 billion, from $44.799 billion in February.
Balances accruing interest rose slightly to $32.689 billion in March, from $32.651 billion the previous month.
By value, credit and charge card purchases increased 9.7 per cent to $17.741 billion in March, from $16.167 billion in February.
A disturbing trend is that cash advances on credit and charge cards increased by 7.4 per cent to $1.034 billion in March, from $963 million in February.
The number of cash advances on credit and charge cards rose by 6.8 per cent in the month.
The number of credit and charge accounts increased by 11,000 in March, while the number of purchases using credit cards rose by 13.3 per cent.
Total credit and charge card balances outstanding rose by 4.3 per cent over the past 12 months, compared with an average of 12.6 per cent over the preceding five years.
Total credit card repayments rose by 11.6 per cent over the past 12 months, compared with an average of 9.2 per cent over the preceding five years.
Total EFTPOS purchases rose to 161.998 million worth $11.213 billion in March, compared with 146.722 million worth $9.912 billion in the previous month.
The value of EFTPOS purchases rose by 18.7 per cent over the past 12 months, compared with an average of 12.3 per cent over the preceding five years.
Thursday, April 30, 2009
Credit card chargebacks may save duped Kleenmaid customers
A little-known credit card benefit offers consumers protection from financial loss.
The business failure of Kleenmaid has left 4500 customers who have placed deposits on $27 million for goods not delivered may get some relief, if they act quickly. You have only a 75 day window from the transaction to make a claim. Eftpos users are also protected.
It appears that Kleenmaid were trading whilst insolvent, not that this seems to worry companies these days.
But here's the good news. Any customer who paid using a credit card [or debit card ]can use their card issuer's chargeback facility to get a full refund. I knew having a credit card had to be useful for something, and I have used this fact myself when buying online and not getting what I paid for.
Chargeback covers services or goods that have been paid for but not supplied.
If it happens you must notify your card issuer, which will investigate the case.
When it is satisfied you are entitled to reverse the transaction, it will credit your account. Because the bank has to look into the matter, it can take a couple of weeks to get the money back. In the case of Kleenmaid there is not much to look into.
The card issuer will then chase the merchant's bank (called the acquiring bank, in payment system jargon) to recover that money. In the card-payment world, the acquiring bank stands behind its merchant customer and has to make good when the sale of goods or services already paid for does not proceed.
Card companies including Visa, Amex and Mastercard were also reported saying customers should be able to get their money back.
Any consumer whose transaction card carries a MasterCard or Visa logo has access to the scheme debit system as well as to Eftpos.
It gets tricky because access to the two systems is through the same card and the same point of sale terminal.
If you press "credit" when you make a payment you are using scheme debit; if you press "savings" or "cheque" you are using Eftpos. Consumers who use the scheme debit system get the same protection as users of MasterCard and Visa credit cards, including chargebacks.
As we said earlier, it's important to notify the card issuer if a chargeback is required quickly. In most cases customers have 75 days, after which the issuer will not reverse the transaction.
Chargebacks are not just for reversing transactions where the goods or services are not supplied. They are also used to correct duplicate billing, to fix a bank processing error or to deal with fraud in cases where customers did not authorise a purchase on their card.
So lodge your claim and good luck!
The business failure of Kleenmaid has left 4500 customers who have placed deposits on $27 million for goods not delivered may get some relief, if they act quickly. You have only a 75 day window from the transaction to make a claim. Eftpos users are also protected.
It appears that Kleenmaid were trading whilst insolvent, not that this seems to worry companies these days.
But here's the good news. Any customer who paid using a credit card [or debit card ]can use their card issuer's chargeback facility to get a full refund. I knew having a credit card had to be useful for something, and I have used this fact myself when buying online and not getting what I paid for.
Chargeback covers services or goods that have been paid for but not supplied.
If it happens you must notify your card issuer, which will investigate the case.
When it is satisfied you are entitled to reverse the transaction, it will credit your account. Because the bank has to look into the matter, it can take a couple of weeks to get the money back. In the case of Kleenmaid there is not much to look into.
The card issuer will then chase the merchant's bank (called the acquiring bank, in payment system jargon) to recover that money. In the card-payment world, the acquiring bank stands behind its merchant customer and has to make good when the sale of goods or services already paid for does not proceed.
Card companies including Visa, Amex and Mastercard were also reported saying customers should be able to get their money back.
Any consumer whose transaction card carries a MasterCard or Visa logo has access to the scheme debit system as well as to Eftpos.
It gets tricky because access to the two systems is through the same card and the same point of sale terminal.
If you press "credit" when you make a payment you are using scheme debit; if you press "savings" or "cheque" you are using Eftpos. Consumers who use the scheme debit system get the same protection as users of MasterCard and Visa credit cards, including chargebacks.
As we said earlier, it's important to notify the card issuer if a chargeback is required quickly. In most cases customers have 75 days, after which the issuer will not reverse the transaction.
Chargebacks are not just for reversing transactions where the goods or services are not supplied. They are also used to correct duplicate billing, to fix a bank processing error or to deal with fraud in cases where customers did not authorise a purchase on their card.
So lodge your claim and good luck!
Property Investors see opportunity in housing needs
Australian residential property is again being viewed as a solid investment, even though low mortgage interest rates won't last forever. This is good news for mortgage brokers who work with investors.
The home construction slow down over the last 12 months hurt mortgage brokers in the area, but that in turn has created a tight rental market and investors are back in the game.
In fact the combination of low interest rates, high rent returns and low prices can produce ,"positively geared" investments. This means two things. Property can be attractive to lower income earners without tax to offset,to be a money making proposition from day one.
This means low capital growth is not a deterrent, and this could be the case over the next few years.
At the end of the day people need somewhere to live and keep their stuff.
If they can't afford to buy, they rent and that means that there will always be people who need to rent in areas with schools, transport and near work.
The home construction slow down over the last 12 months hurt mortgage brokers in the area, but that in turn has created a tight rental market and investors are back in the game.
In fact the combination of low interest rates, high rent returns and low prices can produce ,"positively geared" investments. This means two things. Property can be attractive to lower income earners without tax to offset,to be a money making proposition from day one.
This means low capital growth is not a deterrent, and this could be the case over the next few years.
At the end of the day people need somewhere to live and keep their stuff.
If they can't afford to buy, they rent and that means that there will always be people who need to rent in areas with schools, transport and near work.
Australians suffer relative interest rates rise as Australian Banks siphon off the cream for themselves.
It's an Australian pastime to bag the banks I know, but they deserve a special mention for their conduct over the past few interest rate drops where they have sought to siphon off rate cuts meant for customers for their own profit margins.
Yes, they are able to pass on the full rate cuts. They can't be trusted and should not be placed in a position where they can decide not to pass on rate cuts if they choose not to.
The problem is twofold.
Firstly they are answerable to no one. Where's this regulation they talk about?
Secondly that they don't have the competition they used to because:
Yes, they are able to pass on the full rate cuts. They can't be trusted and should not be placed in a position where they can decide not to pass on rate cuts if they choose not to.
The problem is twofold.
Firstly they are answerable to no one. Where's this regulation they talk about?
Secondly that they don't have the competition they used to because:
- Second tier lenders can't get the same rates they enjoy due to drops in State Credit ratings, and thus regional lenders ratings.
- Many of their competitors in the securitised mortgage market can't get funds like they used to.
What Australia needs is a Government sponsored mortgage manager such as Freddie Mac and Fannie Mae in the US so that they can get Government backed funds at competitive rates so that competitive funds can be controlled by the Government and a healthy regulated Mortgage broking industry.
This would produce more jobs and make the construction industry less uncertain and give Australians a better deal to buy their own home.
The Four Major Banks have had to too good for too long. Its time to cut the fat.
Channel Seven's Today Tonight show dragged through the courts over dodgy investment gurus programs kickbacks
The oldest scam in the book is to "let people in on a secret to get rich".
If you knew a secret that did this you would be too busy using the knowledge and counting the money to tell anyone. Unless your secret to wealth is to in fact make money from people that you dupe into believing that you are in fact a nice person and want to help. To do this you need a prop. Something that gives you the trust factor. Makes you appear legit. Enter Australian Media Giant Channel Seven.
Well in appears that a program on a broadcasting station that most would trust was found to be taking kickbacks from the people sucked in by lies, and they were targeting women no less."The High Court of Australia has found a television current affairs program, broadcast by Channel Seven, breached trade practices laws by entering into a deal for exclusive get-rich-quick stories.
In October 2003 and January 2004 the Seven Network's Today Tonight program broadcast exclusive stories on an investment mentoring program called Wildly Wealthy Women (WWW). The exclusives were organised with Today Tonight by a "marketeer" who had made arrangements with WWW to receive a commission for every woman who signed up to the investment program.
The Today Tonight programs stated that participants in the WWW program would become millionaires through investing in property, even if they had no money to start with.
The Australian Competition and Consumer Commission (ACCC) took action, saying the TV program had no reasonable grounds to make such assertions.
The Seven Network did not dispute that the programs contained untrue claims about the wealth and assets of the two women who were offering the training.
Nor did it dispute that certain representations made in the episodes were misleading and deceptive."
But the Full Court of the Federal Court in June 2008 found the media exemption in the Trade Practices Act - sometimes known as the ''media safe-harbour'' protection - did apply to the Seven Network's broadcast.
So, whilst Section 52 of the Act bans a corporation from engaging in misleading or deceptive conduct, there is an exemption for ''prescribed information providers'', such as broadcasters.
The ACCC argued in the High Court that because of the arrangement made between the network and WWW to broadcast the program, the broadcast was not covered by the exemption. That is, the financial arrangement precluded from from protection.
A majority of members of the High Court on Thursday found the exemption did not apply to situations in which a media outlet publishes matter in relation to ''goods or services where the publication is subject to an arrangement with a supplier of goods or services''.
The High Court allowed the ACCC's appeal, set aside the Full Court's orders and restored the orders made by the original Federal Court judge in 2007 who came down in favour of the ACCC.
Mr Mortgage says shame on you Channel Seven. You thought you could use the law to find a loophole to slide your way out of your responsibilities as a broadcaster.So why are you allowed to still broadcast?
Scammers are everywhere in Australia these days. They are even on your TV, the last place you expect to find them pulling a fast one. But it is the best place to do just that, because the scammer gets the "halo effect" of trust they comes with television. Not any more. No wonder I mostly watch non commercial TV these days.
I have had my "BS" detectors on for years.
If you knew a secret that did this you would be too busy using the knowledge and counting the money to tell anyone. Unless your secret to wealth is to in fact make money from people that you dupe into believing that you are in fact a nice person and want to help. To do this you need a prop. Something that gives you the trust factor. Makes you appear legit. Enter Australian Media Giant Channel Seven.
Well in appears that a program on a broadcasting station that most would trust was found to be taking kickbacks from the people sucked in by lies, and they were targeting women no less."The High Court of Australia has found a television current affairs program, broadcast by Channel Seven, breached trade practices laws by entering into a deal for exclusive get-rich-quick stories.
In October 2003 and January 2004 the Seven Network's Today Tonight program broadcast exclusive stories on an investment mentoring program called Wildly Wealthy Women (WWW). The exclusives were organised with Today Tonight by a "marketeer" who had made arrangements with WWW to receive a commission for every woman who signed up to the investment program.
The Today Tonight programs stated that participants in the WWW program would become millionaires through investing in property, even if they had no money to start with.
The Australian Competition and Consumer Commission (ACCC) took action, saying the TV program had no reasonable grounds to make such assertions.
The Seven Network did not dispute that the programs contained untrue claims about the wealth and assets of the two women who were offering the training.
Nor did it dispute that certain representations made in the episodes were misleading and deceptive."
But the Full Court of the Federal Court in June 2008 found the media exemption in the Trade Practices Act - sometimes known as the ''media safe-harbour'' protection - did apply to the Seven Network's broadcast.
So, whilst Section 52 of the Act bans a corporation from engaging in misleading or deceptive conduct, there is an exemption for ''prescribed information providers'', such as broadcasters.
The ACCC argued in the High Court that because of the arrangement made between the network and WWW to broadcast the program, the broadcast was not covered by the exemption. That is, the financial arrangement precluded from from protection.
A majority of members of the High Court on Thursday found the exemption did not apply to situations in which a media outlet publishes matter in relation to ''goods or services where the publication is subject to an arrangement with a supplier of goods or services''.
The High Court allowed the ACCC's appeal, set aside the Full Court's orders and restored the orders made by the original Federal Court judge in 2007 who came down in favour of the ACCC.
Mr Mortgage says shame on you Channel Seven. You thought you could use the law to find a loophole to slide your way out of your responsibilities as a broadcaster.So why are you allowed to still broadcast?
Scammers are everywhere in Australia these days. They are even on your TV, the last place you expect to find them pulling a fast one. But it is the best place to do just that, because the scammer gets the "halo effect" of trust they comes with television. Not any more. No wonder I mostly watch non commercial TV these days.
I have had my "BS" detectors on for years.
Friday, April 17, 2009
Debt relief' made easy for credit card users as more middle class earners declare bankruptcy
Middle class and high income earners are increasingly taking advantage of cheap and easy insolvencies to escape credit card debt and go bankrupt.
Australia is experiencing a boom in insolvency activity and Victoria is the epicentre of the debt crisis. In the three months to March 31 this year the number of consumer debt agreements entered into skyrocketed up by almost 40 per cent, compared with the same period last year. Bankruptcies were also up 16 per cent, with the vast majority of those being non-business related. Personal insolvency agreements, which are generally undertaken by higher income earners who cannot repay consumer debts, jumped up by more than 50 per cent off a low base. The Insolvency and Trustee Service Australia reports that total insolvency activity was up 18 per cent across the nation in the March quarter. But the Victorian statistics are particularly alarming with total insolvency activity up more than 22 per cent. Only Tasmania showed more growth than Victoria in the numbers of people who cannot repay their debts. Debt counsellors say bankruptcy is a relatively cheap and easy option for people who have lost their job and cannot repay their debts."Bankruptcy can be a pretty cheap option if there are no real assets and no capacity to pay," says John Beecroft, an insolvency specialist in South Yarra."We do the paperwork and send it off to the Insolvency and Trustee Service where it is basically a paper entry."
Digby Ross, the official receiver at ITSA, agrees that bankruptcy can be a cheap and easy option for debtors. "It is a fairly straightforward process," says Mr Ross."They have to prepare a one-page petition and a statement of affairs covering their creditors, any property they have, and their personal details."That is filed with us and when it is accepted the person is bankrupt.
There are no court appearances required."A bankrupt person is generally denied credit for three years. A permanent record of the bankruptcy is placed on the National Personal Insolvency Index, an electronic public register. John Beecroft from debt assist says there has been a noticeable change in the type of people asking for assistance in the past few months."When rates and fuel prices were high we were seeing lots of people from the outer suburbs, now we are seeing more from middle class suburbs and above. "People who have used their credit cards to buy shares and had a margin call is pretty common -- or property investments that have gone wrong," said Mr Beecroft. Bankruptcy is a common option for people losing their jobs, he says.
Australia is experiencing a boom in insolvency activity and Victoria is the epicentre of the debt crisis. In the three months to March 31 this year the number of consumer debt agreements entered into skyrocketed up by almost 40 per cent, compared with the same period last year. Bankruptcies were also up 16 per cent, with the vast majority of those being non-business related. Personal insolvency agreements, which are generally undertaken by higher income earners who cannot repay consumer debts, jumped up by more than 50 per cent off a low base. The Insolvency and Trustee Service Australia reports that total insolvency activity was up 18 per cent across the nation in the March quarter. But the Victorian statistics are particularly alarming with total insolvency activity up more than 22 per cent. Only Tasmania showed more growth than Victoria in the numbers of people who cannot repay their debts. Debt counsellors say bankruptcy is a relatively cheap and easy option for people who have lost their job and cannot repay their debts."Bankruptcy can be a pretty cheap option if there are no real assets and no capacity to pay," says John Beecroft, an insolvency specialist in South Yarra."We do the paperwork and send it off to the Insolvency and Trustee Service where it is basically a paper entry."
Digby Ross, the official receiver at ITSA, agrees that bankruptcy can be a cheap and easy option for debtors. "It is a fairly straightforward process," says Mr Ross."They have to prepare a one-page petition and a statement of affairs covering their creditors, any property they have, and their personal details."That is filed with us and when it is accepted the person is bankrupt.
There are no court appearances required."A bankrupt person is generally denied credit for three years. A permanent record of the bankruptcy is placed on the National Personal Insolvency Index, an electronic public register. John Beecroft from debt assist says there has been a noticeable change in the type of people asking for assistance in the past few months."When rates and fuel prices were high we were seeing lots of people from the outer suburbs, now we are seeing more from middle class suburbs and above. "People who have used their credit cards to buy shares and had a margin call is pretty common -- or property investments that have gone wrong," said Mr Beecroft. Bankruptcy is a common option for people losing their jobs, he says.
Mortgage Brokers expected to boom as home owners seek to refinance after RBA's interest rate cut
Mortgage Brokers are expected to be busy as home owners refinance from high fixed-rate mortgages after yesterday's 25-basis-point interest rate cut, coupled with high real estate sales figures in the low cost areas.
The sticking point for many will be hefty fixed rate "break fees", which can be more than $20,000 on a $500,000 home loan.
Break fees, made up of a comparatively small charge to exit the loan plus a bigger fee that is the economic cost to the bank of losing the business, had become a bigger proportion of housing loan fees in recent years, he said.
The Housing Industry Association yesterday called on banks to drop severance and other refinancing charges from fixed-rate loans, but banks are unlikely to do so.
HIA chief executive Chris Lamont said banks would be swamped with borrowers trying to refinance.
A home loan taken out early last year when mortgage rates were 7.5-8 per cent would cost a borrower about $670 a month more on a $250,000 home loan, than if the loan were taken out today, he said.
Mr Lamont believes yesterday's drop in the cash rate will have little impact on the housing market, even if passed on by the banks, as buyers already believe mortgage rates are reaching the bottom of the cycle.
"Falling interest rates are now being overshadowed by the availability of finance, with the banks asking for higher deposits, particularly from first-home buyers," he said.
Real estate agents are reporting increased home sales, particularly for lower-priced property, with Australia's biggest agent, Ray White, making $2.37billion of sales last month, a 15 per cent rise on the same month last year.
The sticking point for many will be hefty fixed rate "break fees", which can be more than $20,000 on a $500,000 home loan.
Break fees, made up of a comparatively small charge to exit the loan plus a bigger fee that is the economic cost to the bank of losing the business, had become a bigger proportion of housing loan fees in recent years, he said.
The Housing Industry Association yesterday called on banks to drop severance and other refinancing charges from fixed-rate loans, but banks are unlikely to do so.
HIA chief executive Chris Lamont said banks would be swamped with borrowers trying to refinance.
A home loan taken out early last year when mortgage rates were 7.5-8 per cent would cost a borrower about $670 a month more on a $250,000 home loan, than if the loan were taken out today, he said.
Mr Lamont believes yesterday's drop in the cash rate will have little impact on the housing market, even if passed on by the banks, as buyers already believe mortgage rates are reaching the bottom of the cycle.
"Falling interest rates are now being overshadowed by the availability of finance, with the banks asking for higher deposits, particularly from first-home buyers," he said.
Real estate agents are reporting increased home sales, particularly for lower-priced property, with Australia's biggest agent, Ray White, making $2.37billion of sales last month, a 15 per cent rise on the same month last year.
Thursday, April 16, 2009
Banks selling people into unstainable debt
Buying a home is the best investment you can make, and it may seen like the right thing to do for the economy, but what is the best for you?
Homes are still high in value, maybe too high, and just because your bank will lend you big bucks [nearly $500,000] on small incomes of as low as [$80,000] does the 30 year mortgage make sense to you in these times?
First time home buyers are being warned that generous loan criteria offered by banks could land them in mortgage stress for many years to come.
Buying a low cost home is the better option with joint incomes under $100,000.
Use the Rule of Three
Try to use the rule of three. If you earn $100,000 as a gross income, then you can aford a $300,000 mortgage even when interestrates reach 9%. If you earn $200,000, then you can easily afford a $600,000 mortgage [even if you wisely decide that you don't want this much financial burden]. The solution to buying a more expensive home should be greater earnings, not loose lending.
Buying the biggest home you can afford during the lowest interest rates in history ever is foolish nad may come back to bite you, and the banks should know better, and in my view they may be taking advantage of young inexperienced home buyers without letting them know the consquences of interest rate rises, their other financial commitments that are hidden inside each mortgage document, and the banks foreclosure policy should they fail to make repayments.
Buying a home on the basis that prices and demand will surely rise may be a myth from the past echoes of the baby boomers last gasp.
Homes are still high in value, maybe too high, and just because your bank will lend you big bucks [nearly $500,000] on small incomes of as low as [$80,000] does the 30 year mortgage make sense to you in these times?
First time home buyers are being warned that generous loan criteria offered by banks could land them in mortgage stress for many years to come.
Buying a low cost home is the better option with joint incomes under $100,000.
Use the Rule of Three
Try to use the rule of three. If you earn $100,000 as a gross income, then you can aford a $300,000 mortgage even when interestrates reach 9%. If you earn $200,000, then you can easily afford a $600,000 mortgage [even if you wisely decide that you don't want this much financial burden]. The solution to buying a more expensive home should be greater earnings, not loose lending.
Buying the biggest home you can afford during the lowest interest rates in history ever is foolish nad may come back to bite you, and the banks should know better, and in my view they may be taking advantage of young inexperienced home buyers without letting them know the consquences of interest rate rises, their other financial commitments that are hidden inside each mortgage document, and the banks foreclosure policy should they fail to make repayments.
Buying a home on the basis that prices and demand will surely rise may be a myth from the past echoes of the baby boomers last gasp.
Will 30,000 Australian homes be repossessed by Christmas 2009?
For over 100,000 Australian's the dream of homeownership could turn sour as sources expect that 30,000 homes will be repossessed or mortgages foreclosed on as almost half a million Australians are plunged into severe mortgage stress by the end of the year.
Are you suffering Mortgage Stress?
And around a third of the expected repossessions will be first time home buyers who bought in the last 12 months, the Mortgage Stress report predicts.
According to News.com.au the report estimates that 30,741 homes will be repossessed or subject to foreclosure - where a lender takes control of a mortgaged property and holds a forced sale - and 497,168 homeowners will be in “severe mortgage stress” by December.
These forecasts are based on the unemployment rate rising 7.5 per cent by the end of the year. [Some people are saying 9% by 2010 could be the reality if the recession deepens].
The Federal Government predicts the unemployment rate will rise to 7 per cent by mid-2010, meaning an extra 300,000 jobless.
Government Subsidies and lower interest rates have helped.The Fujitsu Mortgage Stress report takes into account the decline in the number of home owners facing potential sale or foreclosures from 164,590 homes in February to 96,532 in March due to Federal Government handouts and lower interest rates.
If you lose your job, apply for benefits the same day!
Our advice is that home owners should seek financial assistance early if they feared trouble ahead, and to let creditors and bankers know that you cannot meet your commitments as soon as you know..
Also if the worst happens and lose your job, then apply for benefits on the same day of termination and make sure that you have all the necessay paperwork with you when you go to Centrelink. This will get your benefits in your bank account as soon as possible.
If your mortgage is too great a burden move quickly to effect a sale.
Should you need to sell your home, don't wait for the eviction notice. Move quickly to have your on the market for the longest time possible to get the best possible offer. Waiting for something to turn up may be the worst option and will damage your credit.
Weigh things up. How much cash do you have on hand? How long will you be out of work? Will your home be worth more of less in 12 months from now?
Doing these things will give you certainty of mind and free you to look for work in a more determined frame of mind.
Are you suffering Mortgage Stress?
And around a third of the expected repossessions will be first time home buyers who bought in the last 12 months, the Mortgage Stress report predicts.
According to News.com.au the report estimates that 30,741 homes will be repossessed or subject to foreclosure - where a lender takes control of a mortgaged property and holds a forced sale - and 497,168 homeowners will be in “severe mortgage stress” by December.
These forecasts are based on the unemployment rate rising 7.5 per cent by the end of the year. [Some people are saying 9% by 2010 could be the reality if the recession deepens].
The Federal Government predicts the unemployment rate will rise to 7 per cent by mid-2010, meaning an extra 300,000 jobless.
Government Subsidies and lower interest rates have helped.The Fujitsu Mortgage Stress report takes into account the decline in the number of home owners facing potential sale or foreclosures from 164,590 homes in February to 96,532 in March due to Federal Government handouts and lower interest rates.
If you lose your job, apply for benefits the same day!
Our advice is that home owners should seek financial assistance early if they feared trouble ahead, and to let creditors and bankers know that you cannot meet your commitments as soon as you know..
Also if the worst happens and lose your job, then apply for benefits on the same day of termination and make sure that you have all the necessay paperwork with you when you go to Centrelink. This will get your benefits in your bank account as soon as possible.
If your mortgage is too great a burden move quickly to effect a sale.
Should you need to sell your home, don't wait for the eviction notice. Move quickly to have your on the market for the longest time possible to get the best possible offer. Waiting for something to turn up may be the worst option and will damage your credit.
Weigh things up. How much cash do you have on hand? How long will you be out of work? Will your home be worth more of less in 12 months from now?
Doing these things will give you certainty of mind and free you to look for work in a more determined frame of mind.
Sunday, February 08, 2009
Bank's head for a bleak year of bad debts and this will affect your mortgage
Commonwealth Bank of Australia Ltd first-half profit figures were better than expected, taking much of the suspense out of its results announcement this week.
Nevertheless, investors and analysts will be looking closely at the report on February 11 to see how much bad debts have increased because of the economic slowdown.
Mortgage lenders and home buyers want to know whether loan margins have suffered because of the higher funding costs, or grown because of the increased market power the Sydney-based bank has gained, as competitors went bust or got taken over.
The reality will be that relative to central bank interest rate movements, mortgage rates will be higher because the CBA and other major bank are unlikely to pass through any future interest rate cuts.
On February 2, Sydney-based CBA said first-half cash profit after tax was likely to be around $2 billion, 16 per cent lower than the year before, but more than 20 per cent higher than the consensus estimate.
CBA also said total operating income for the six months to December 31, 2008 would increase by 15 per cent to $8 billion, while operating costs had fallen about two per cent.
"It does look like the revenue is substantially higher than everyone expected, and the cost side looks pretty good too,'' Tyndall Investment Management portfolio manager Craig Young said.
Mr Young, who helps manage $4 billion in assets, including CBA shares, said the first thing to look for in CBA's result was how the bad debts were going.
"CBA is a little less provisioned than the other banks and it will be interesting to see if that's still an issue,'' he said.
The bank said on February 2 that impairment charges would rise to $1.6 billion, in line with market consensus.
"The loan losses are going to go up even more,'' Southern Cross Equities analyst TS Lim said. But Mr Lim said the problems with bad debts were likely to hit harder in the second half.
"Small businesses are going to get into strife,'' he said.
In December CBA increased its forecast for full-year impairment expense to gross loans and acceptances to 60 basis points, prompting Mr Lim to raise his estimate for the ratio to around 70 basis points.
The bank was criticised at the time for trying to alert prospective institutional investors to the updated impairment ratio without informing the market as a whole.
CBA said income growth was driven by a 20 per cent rise in banking income, as demand for deposits and lending remained strong.
The growth in banking income would be offset by the 12 per cent decline in funds management income, the bank said.
Tyndall's Mr Young said CBA had probably benefited from its increased market dominance, and that was likely to show through in improved margins.
The stronger market position "will come through in both the asset growth and margin,'' Mr Young said.
"It's very hard to see how much they're passing on to their business customers.''
CBA said statutory net profit after tax would rise about nine per cent to $2.5 billion, boosted by a post-tax gain of $550 million on the acquisition of BankWest, a key competitor the bank was able to take out of the market.
That may have offset higher wholesale funding costs, Mr Young said.
Nevertheless, investors and analysts will be looking closely at the report on February 11 to see how much bad debts have increased because of the economic slowdown.
Mortgage lenders and home buyers want to know whether loan margins have suffered because of the higher funding costs, or grown because of the increased market power the Sydney-based bank has gained, as competitors went bust or got taken over.
The reality will be that relative to central bank interest rate movements, mortgage rates will be higher because the CBA and other major bank are unlikely to pass through any future interest rate cuts.
On February 2, Sydney-based CBA said first-half cash profit after tax was likely to be around $2 billion, 16 per cent lower than the year before, but more than 20 per cent higher than the consensus estimate.
CBA also said total operating income for the six months to December 31, 2008 would increase by 15 per cent to $8 billion, while operating costs had fallen about two per cent.
"It does look like the revenue is substantially higher than everyone expected, and the cost side looks pretty good too,'' Tyndall Investment Management portfolio manager Craig Young said.
Mr Young, who helps manage $4 billion in assets, including CBA shares, said the first thing to look for in CBA's result was how the bad debts were going.
"CBA is a little less provisioned than the other banks and it will be interesting to see if that's still an issue,'' he said.
The bank said on February 2 that impairment charges would rise to $1.6 billion, in line with market consensus.
"The loan losses are going to go up even more,'' Southern Cross Equities analyst TS Lim said. But Mr Lim said the problems with bad debts were likely to hit harder in the second half.
"Small businesses are going to get into strife,'' he said.
In December CBA increased its forecast for full-year impairment expense to gross loans and acceptances to 60 basis points, prompting Mr Lim to raise his estimate for the ratio to around 70 basis points.
The bank was criticised at the time for trying to alert prospective institutional investors to the updated impairment ratio without informing the market as a whole.
CBA said income growth was driven by a 20 per cent rise in banking income, as demand for deposits and lending remained strong.
The growth in banking income would be offset by the 12 per cent decline in funds management income, the bank said.
Tyndall's Mr Young said CBA had probably benefited from its increased market dominance, and that was likely to show through in improved margins.
The stronger market position "will come through in both the asset growth and margin,'' Mr Young said.
"It's very hard to see how much they're passing on to their business customers.''
CBA said statutory net profit after tax would rise about nine per cent to $2.5 billion, boosted by a post-tax gain of $550 million on the acquisition of BankWest, a key competitor the bank was able to take out of the market.
That may have offset higher wholesale funding costs, Mr Young said.
NAB flags strong revenue growth, supports Rudd's economic stimulas package to break the cycle
National Australia Bank's new CEO delivered his debut quarterly trading update for NAB, flagging strong revenue growth, broadening bad debt issues, increasing economic uncertainty and the clear and present danger that rising funding costs would prevent NAB from passing on the full amount of any future rate cuts.
But Clyne's commentary show it would be a mistake for anyone to imagine our banks will remain immune from the economic realities, either here or internationally.
There are tough and testing times ahead and the wave of bad debts that will inevitably be generated by our almost certain recession will hit bank profits and eat into their statutory capital.
As that happens, we can expect the banks to move with defensive vigour to protect their capital bases by trimming dividends and raising new capital, though either vanilla or hybrid equity.
Each of the banks, either formally or anecdotally, is reinforcing the same business themes.
Their revenues and pre-provision earnings have been buoyed by government underwriting and the rush to quality inspired by uncertainty and volatility. Bad debts are on the rise, however, and if unemployment reaches anything like the 7 per cent widely predicted by their own economists, the need for more severe collective provisioning will intensify. There is confidence that, even if unemployment hits about 7 per cent, the mortgage books will remain largely sound. There is a general expectation that, over the coming six months there will be a worrying and costly deterioration of the business lending books.
It is clear, for example, that having almost instantly squeezed the life out of the vulnerable at the top end of the corporate food chain, the global financial crisis is beginning to migrate to the small and medium business sector.
As Clyne said yesterday, the single names that forced NAB's $521 million worth of specific provisions over the December quarter have been well known for the best part of 12 months.
"But we are starting to see more general stress and deterioration in the SME book," he said.
Small and medium businesses are the core generator of entrepreneurial wealth and employment in Australia.
The real danger of a meaningful, extended recession in that sector is that it becomes almost self-perpetuating. A small business closes, causing unemployment, which in turn forces more businesses to shut their doors. And so on. That is why NAB's collective provision increased nearly 30 per cent to $303 million over its first quarter and that is why the Rudd Government has acted so quickly in deciding to spend $42 billion of our national surplus.
The aim is to provide a circuit breaker to prevent recession.
The future is very uncertain and it is neither sensible nor realistic toThe NAB boss's briefing was a sober bookend to a week that opened with the Commonwealth Bank's Ralph Norris confirming the CBA would deliver earnings stronger than market consensus, which was then punctuated by Suncorp's rush to recapitalise in the wake of a weakening earnings outlook.
try to predict the future
But Clyne's commentary show it would be a mistake for anyone to imagine our banks will remain immune from the economic realities, either here or internationally.
There are tough and testing times ahead and the wave of bad debts that will inevitably be generated by our almost certain recession will hit bank profits and eat into their statutory capital.
As that happens, we can expect the banks to move with defensive vigour to protect their capital bases by trimming dividends and raising new capital, though either vanilla or hybrid equity.
Each of the banks, either formally or anecdotally, is reinforcing the same business themes.
Their revenues and pre-provision earnings have been buoyed by government underwriting and the rush to quality inspired by uncertainty and volatility. Bad debts are on the rise, however, and if unemployment reaches anything like the 7 per cent widely predicted by their own economists, the need for more severe collective provisioning will intensify. There is confidence that, even if unemployment hits about 7 per cent, the mortgage books will remain largely sound. There is a general expectation that, over the coming six months there will be a worrying and costly deterioration of the business lending books.
It is clear, for example, that having almost instantly squeezed the life out of the vulnerable at the top end of the corporate food chain, the global financial crisis is beginning to migrate to the small and medium business sector.
As Clyne said yesterday, the single names that forced NAB's $521 million worth of specific provisions over the December quarter have been well known for the best part of 12 months.
"But we are starting to see more general stress and deterioration in the SME book," he said.
Small and medium businesses are the core generator of entrepreneurial wealth and employment in Australia.
The real danger of a meaningful, extended recession in that sector is that it becomes almost self-perpetuating. A small business closes, causing unemployment, which in turn forces more businesses to shut their doors. And so on. That is why NAB's collective provision increased nearly 30 per cent to $303 million over its first quarter and that is why the Rudd Government has acted so quickly in deciding to spend $42 billion of our national surplus.
The aim is to provide a circuit breaker to prevent recession.
Saturday, February 07, 2009
Banks get cranky over Government rate reduction pass on demands
Australian banks are set for another showdown with the Rudd Government over future interest rate cuts, with NAB boss Cameron Clyne making clear this morning he was "relatively unlikely" to pass on the full amount of the next rate cut.
NAB economist Alan Oster is forecasting another 75 basis rate cut next month with another 50 basis points in the second half this year.
Clyne made clear his customers won't be getting that amount.
Other banks contacted this morning confided they agreed with Clyne, underlining the politics of the move earlier this week to pass on the full level of the 100 basis point cut on official interest rates.
The rate cut came on the day of the Government’s $42 billion handout and the day after CBA told the market it was growing income quickly thanks to better profit margins, so in the scheme of things it would not have looked good for the big banks to have played hard ball this week.
Next time it will be different.
Each bank has a different funding book depending on the level of deposits and the like, but NAB’s costs have gone up from 65 basis points over cash rates from July 2007 to January this year to 99 basis today and it is looking at that increasing to 99 basis points in the near future.
The reason being term funding costs are higher because while cash rates have fallen and the swap rate spread has also fallen, Government bond rates have not fallen as quickly, so as the banks replace short term paper with long term paper the funding costs increase.
That at least is how the big banks see the world.
NAB economist Alan Oster is forecasting another 75 basis rate cut next month with another 50 basis points in the second half this year.
Clyne made clear his customers won't be getting that amount.
Other banks contacted this morning confided they agreed with Clyne, underlining the politics of the move earlier this week to pass on the full level of the 100 basis point cut on official interest rates.
The rate cut came on the day of the Government’s $42 billion handout and the day after CBA told the market it was growing income quickly thanks to better profit margins, so in the scheme of things it would not have looked good for the big banks to have played hard ball this week.
Next time it will be different.
Each bank has a different funding book depending on the level of deposits and the like, but NAB’s costs have gone up from 65 basis points over cash rates from July 2007 to January this year to 99 basis today and it is looking at that increasing to 99 basis points in the near future.
The reason being term funding costs are higher because while cash rates have fallen and the swap rate spread has also fallen, Government bond rates have not fallen as quickly, so as the banks replace short term paper with long term paper the funding costs increase.
That at least is how the big banks see the world.
Reserve Bank of Australia flags end to mortgage rate cuts and forecasts slower growth
The Reserve Bank of Australia has flagged the likely end of big interest rate cuts, with some economists betting it may hold back on further reductions for several months.
And financial markets scaled back expectations today on the depth of future interest rate cuts after the RBA released its quarterly statement on monetary policy.
A Credit Suisse report said financial markets now priced a total of 50 basis points in further rate reductions over the next 12 months, down from 68 points yesterday.
Macquarie Bank interest rates strategist Rory Robertson said he expected the RBA to “sit on its hands” at the next two meetings while it assesses the impact of the past five rate cuts and the federal Government’s $42 billion stimulus package.
“After having delivered an appropriately aggressive response to the post-Lehman Brothers collapse in global growth prospects, the RBA now can make a respectable case to wait and watch for a while,” said Mr Robertson.
“It’s certainly possible that rates will go to 2 per cent, but it will take longer to get there than three months.”
The central bank earlier this week slashed rates by 100 basis points to a 45-year low of 3.25 per cent, taking total rate cuts to 400 points since September, when the collapse of Lehman Brothers froze global credit markets and smashed equity markets.
In its statement today, the RBA said significant fiscal and monetary stimulus was now pumping through the veins of the crisis-weary economy.
Investors interpreted the statement as signally a more cautious approach to future easings in monetary policy, sending three-year bond futures down 15 points to 96.69 by late afternoon.
Australia's Central Bank also sharply lowered its forecasts for economic growth in coming years, implying that the economy was still at risk of joining major countries in recession before starting to pick up in late 2009.
The RBA expects year-on-year growth of 0.25 per cent in 2008-09, before improving somewhat in 2009-10 with growth of 1.25 per cent. The economy grew by around 1.9 per cent in the third quarter of 2008 from a year earlier.
The non-farm economy will post zero year-on-year growth in the June quarter this year before recovering to expand by 1.25 per cent on year in the middle of 2010, the central bank forecast.
“While the international situation is likely to remain difficult for some time, the combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad,” the RBA said.
Mr Robertson said: “The bank has moved so far, so fast that its head is spinning and it’s time to sit back and assess the situation.
“The point of moving more gradually from here would be to ensure that the policy rate is properly calibrated to Australia’s economic prospects, not to the bleaker outlooks for the US, UK, Japanese and Euro-zone economies.”
NAB Capital senior economist David de Garis said he expected the RBA to cut rates by 75 basis points in March and then wait until the September quarter to cut rates by another 50 basis points.
said Mr de Garis.
CommSec economist Savanth Sebastian said he expected the RBA to cut the cash rate by another 50-75 basis points over the next two months.
“More than likely the Reserve Bank will follow a similar pattern to that noted by the European Central Bank and keep rates on hold in March, assess all the incoming data before cutting rates once again in April,” said Mr Sebastian.
The RBA's growth forecast for the near term is slightly more pessimistic than the Rudd Government, which earlier this week forecast the economy would grow by 1.0 per cent in 2008-09, before slowing to 0.75 per cent in 2009-10.
The central bank forecast 2008-09 growth of just 0.75 per cent.
Late yesterday, Treasury Secretary Ken Henry, who is also a member of the RBA's policy making board, told a parliamentary committee that the Government's forecasts for economic growth were based on an assumption that rates will be cut further.
The impact of the intensified slowdown in the world economy in recent months and the economic stimulus being put in place would result in the downturn and recovery being more V-shaped, according to the RBA's latest forecasts.
Deeper troughs in growth will be followed by strong growth of 3.25 per cent on year by mid-2011. Previously the RBA had forecast the economy would be growing at 3.0 per cent by mid-2011.
Substantial stimulus has also flowed to the Australian economy in recent months as a result of a sharp decline in the Australian dollar.
The currency came close to parity with the US dollar in mid-2008, before plunging to just above US60 cents late last year and then recovering to around US65c currently. In trade weighted terms, the Australian dollar is 20 per cent below its level a year ago.
The RBA also revised its forecasts for inflation, predicting annual rises in the consumer price index would fall back to within the central bank's 2-to-3 per cent target band by mid-2009. Previously it had forecast the CPI would not be safely tucked within the band until mid-2011.
Despite expectations of an eventual growth recovery, the RBA expects the jobless rate will rise further. "With job vacancies and hiring intentions falling and short-term economic prospects subdued, more significant rises in unemployment are likely in the period ahead," the RBA said.
Some improvement in the house construction sector can be expected after a sharp downturn in 2008. Significantly lower interest rates and direct financial assistance for new home buyers by the government were now showing signs of adding to housing demand, it said.
Consumer confidence remained battered, but some recovery can be expected as the government spending measures and lower interest rates add "further to household incomes in the March and June quarters this year", the central bank said.
Also insulating Australia from the full heat of the global economic downturn was a strong financial sector, which has allowed a substantial amount of monetary policy easing to be passed through to consumers and more so than in many other countries, it said.
Still, the RBA is keeping close watch on business investment, warning investment intentions are being significantly wound back as some companies experience difficulty in obtaining credit.
Business confidence deteriorated sharply in October and November but this "has been partially reversed in December and January," the central bank said.
Against a backdrop of rising unemployment and weakening economic growth, the RBA would be under pressure to continue cutting interest rates for at least the next year or two, said Mr Robertson.
And financial markets scaled back expectations today on the depth of future interest rate cuts after the RBA released its quarterly statement on monetary policy.
A Credit Suisse report said financial markets now priced a total of 50 basis points in further rate reductions over the next 12 months, down from 68 points yesterday.
Macquarie Bank interest rates strategist Rory Robertson said he expected the RBA to “sit on its hands” at the next two meetings while it assesses the impact of the past five rate cuts and the federal Government’s $42 billion stimulus package.
“After having delivered an appropriately aggressive response to the post-Lehman Brothers collapse in global growth prospects, the RBA now can make a respectable case to wait and watch for a while,” said Mr Robertson.
“It’s certainly possible that rates will go to 2 per cent, but it will take longer to get there than three months.”
The central bank earlier this week slashed rates by 100 basis points to a 45-year low of 3.25 per cent, taking total rate cuts to 400 points since September, when the collapse of Lehman Brothers froze global credit markets and smashed equity markets.
In its statement today, the RBA said significant fiscal and monetary stimulus was now pumping through the veins of the crisis-weary economy.
Investors interpreted the statement as signally a more cautious approach to future easings in monetary policy, sending three-year bond futures down 15 points to 96.69 by late afternoon.
Australia's Central Bank also sharply lowered its forecasts for economic growth in coming years, implying that the economy was still at risk of joining major countries in recession before starting to pick up in late 2009.
The RBA expects year-on-year growth of 0.25 per cent in 2008-09, before improving somewhat in 2009-10 with growth of 1.25 per cent. The economy grew by around 1.9 per cent in the third quarter of 2008 from a year earlier.
The non-farm economy will post zero year-on-year growth in the June quarter this year before recovering to expand by 1.25 per cent on year in the middle of 2010, the central bank forecast.
“While the international situation is likely to remain difficult for some time, the combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad,” the RBA said.
Mr Robertson said: “The bank has moved so far, so fast that its head is spinning and it’s time to sit back and assess the situation.
“The point of moving more gradually from here would be to ensure that the policy rate is properly calibrated to Australia’s economic prospects, not to the bleaker outlooks for the US, UK, Japanese and Euro-zone economies.”
NAB Capital senior economist David de Garis said he expected the RBA to cut rates by 75 basis points in March and then wait until the September quarter to cut rates by another 50 basis points.
There’s a time that central banks have to stand back and take a deep breath,
said Mr de Garis.
CommSec economist Savanth Sebastian said he expected the RBA to cut the cash rate by another 50-75 basis points over the next two months.
“More than likely the Reserve Bank will follow a similar pattern to that noted by the European Central Bank and keep rates on hold in March, assess all the incoming data before cutting rates once again in April,” said Mr Sebastian.
The RBA's growth forecast for the near term is slightly more pessimistic than the Rudd Government, which earlier this week forecast the economy would grow by 1.0 per cent in 2008-09, before slowing to 0.75 per cent in 2009-10.
The central bank forecast 2008-09 growth of just 0.75 per cent.
Late yesterday, Treasury Secretary Ken Henry, who is also a member of the RBA's policy making board, told a parliamentary committee that the Government's forecasts for economic growth were based on an assumption that rates will be cut further.
The impact of the intensified slowdown in the world economy in recent months and the economic stimulus being put in place would result in the downturn and recovery being more V-shaped, according to the RBA's latest forecasts.
Deeper troughs in growth will be followed by strong growth of 3.25 per cent on year by mid-2011. Previously the RBA had forecast the economy would be growing at 3.0 per cent by mid-2011.
Substantial stimulus has also flowed to the Australian economy in recent months as a result of a sharp decline in the Australian dollar.
The currency came close to parity with the US dollar in mid-2008, before plunging to just above US60 cents late last year and then recovering to around US65c currently. In trade weighted terms, the Australian dollar is 20 per cent below its level a year ago.
The RBA also revised its forecasts for inflation, predicting annual rises in the consumer price index would fall back to within the central bank's 2-to-3 per cent target band by mid-2009. Previously it had forecast the CPI would not be safely tucked within the band until mid-2011.
Despite expectations of an eventual growth recovery, the RBA expects the jobless rate will rise further. "With job vacancies and hiring intentions falling and short-term economic prospects subdued, more significant rises in unemployment are likely in the period ahead," the RBA said.
Some improvement in the house construction sector can be expected after a sharp downturn in 2008. Significantly lower interest rates and direct financial assistance for new home buyers by the government were now showing signs of adding to housing demand, it said.
Consumer confidence remained battered, but some recovery can be expected as the government spending measures and lower interest rates add "further to household incomes in the March and June quarters this year", the central bank said.
Also insulating Australia from the full heat of the global economic downturn was a strong financial sector, which has allowed a substantial amount of monetary policy easing to be passed through to consumers and more so than in many other countries, it said.
Still, the RBA is keeping close watch on business investment, warning investment intentions are being significantly wound back as some companies experience difficulty in obtaining credit.
Business confidence deteriorated sharply in October and November but this "has been partially reversed in December and January," the central bank said.
Against a backdrop of rising unemployment and weakening economic growth, the RBA would be under pressure to continue cutting interest rates for at least the next year or two, said Mr Robertson.
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