Interest rates will soon fall says Westpac

According to Westpac the Reserve Bank of Australia is getting ready to cut interest rates. That has to be good news for home buyers, homeowners and housing construction industry. But will it happen in October?

Westpac is Australia's second largest home loan lender, and the biggest winner in mortgage growth in recent years since the GFC. It believes the RBA will start cutting interest rates at its next meeting. Many other experts says lower interest rates are on the way, but after October.

The prophet of profits bank

Westpac, has a good track record in predicting the timing of RBA rate cuts. After all it has a big stake in the outcomes. Westpac believes that reigning in the value of the high Australian dollar would help Australian businesses, especially those that are not in the mining sector.

It would also be shot in the arm for the ailing house building industry, and that is a big employer

ANZ predicts a brace of interest rate cuts, in October next month and in November!

The RBA was close to cutting interest rates in its September meeting, but wanted more data on the economy due later in September . And things are suddenly unraveling for Australia with global economic conditions going south, the drop in commodity prices hurting Australia, and the low inflation all mean the bank could cut the base interest rate at its October 2 meeting.

All in all, a mortgage rate cut of 0.5% before Christmas is looming as a real possibility. Source: Mr Mortgage Mortgage information

Westpac bank passes on rate reduction to thier credit card customers

Australia's first bank was the first bank to pass on the Reserve Bank's 100 basis point interest rate cut to its mortgage customers.
But the real suprise was that Westpac wrer also the first bank to reduce the credit card interest by the full one per cent interest rate also when it announced it will also reduce its 55-day credit card rate by 100 basis points.
The nation's other big banks are yet to announce reductions in either home loan rates or credit card rates, or loans rates to small business, after the Reserve Bank's announcement at 2.30pm (AEDT).

Rising mortgage applications a sign that housing market has turned the corner

Westpac economists said in a research note that the rise housing finance in October signalled the start of a recovery for the housing market.
This momentum will hopefully support the recovery in the housing market.
The RBA's decision to slash interest rates by 400 basis points since September, and the federal government's stimulus package for first home buyers, would get new home buyers into the housing market.
The only downer is the fear of unemployment that is creeping into the scenario.

JP Morgan forecasts the RBA will lower the cash rate by 50 basis points at their next meeting in February, and by another 25 basis points in March to a 3.5 per cent rate, lowest rate since 1965.
Others are now saying that another 100 basis point reduction in February is on the cards.

Westpac Bank throws RAMS a lifeline

Westpac has bought the RAMS brand and franchise network of 92 stores around the country for $140 million - a fraction of what RAMS was worth when the company listed two months ago.
RAMS' share price crashed a month ago when the company revealed the United States credit squeeze was posing funding problems for some of its loans.
Analysts say while the deal would not be the first option for RAMS, it shows Westpac is confident of riding through the credit market crisis.
Good deal
The past two months for RAMS Home Loans have been disastrous.
Just three weeks after listing on the Australian Stock Exchange, its $2.50 share price had crashed to 55 cents.
The company revealed the United States credit squeeze was creating funding problems for $6 billion worth of its home loans.
But today RAMS has received a lifeline. Westpac chief executive David Morgan announced his company has bought the RAMS brand and its shop fronts and agreed to provide up to $2 billion to help the company's funding problems.
"I'm delighted to announce a significant transaction for Westpac, a transaction that expands our distribution reach and provides us with a new growth path," he said.
"On growth, we plan to introduce a broader range of products to complement the RAMS mortgage offering.
"This will initially include a broader set of mortgage products and items such as credit cards, personal loans and general insurance."
RAMS has 92 stores around the country, where customers can go in and purchase a home loan.
The brand is well recognised and the stores are in prime locations in both regional areas and capital cities. This is what a number of banks have been eying off for the past few weeks.
For $140 million, independent banking analyst William Ammentorp says it is a good deal.
"So the big thing is that branch network. A lot of the RAMS franchisees are small businesses operating in local communities," he said.
"They've been providing mortgages and getting people houses for a number of years.
"They pick up those shopfronts and it allows Westpac to perhaps sell Westpac product through those RAMS distribution outlets, but also the opportunity to have yet another outlet to sell through."
"I think Westpac commented it was a 10 per cent uplift in their branch network when this transaction settles."
Solid sector
Mr Ammentorp also says the deal could be a sign Australia has seen the worst of global credit market crisis.
"The larger organisations are doing very well," he said.
"They are very well-capitalised, very well-run, and in times like this it shows just the strength of the Australian banking sector.
"That's not to say there couldn't be difficulties. Northern Rock, the lines around Northern Rock with people withdrawing funds had absolutely no rational basis yet it happened.
"So I'm not suggesting it could happen here, but you never know what can happen in a marketplace.
"But certainly the Australian banking sector and Australian financial services are renowned around the world for being solid and very, very well-run."
The sale is now subject to shareholder approval and is expected to be finalised by January next year.Source: ABC

Wespac Boss says the big banks need scale to compete globally

Wespac Banking Corp chief executive David Morgan says Australia' so-called 'four pillars' banking policy is a 'woolly mammoth" that is creating a problem for the domestic economy.
Dr Morgan says it's time for the federal government to abolish the policy, which prevents the top four banks - Westpac, ANZ, National Australia Bank and Commonwealth Bank of Australia - from merging.
"While everyone else is getting on with life in the marketplace, the banks are commanded forever to be blocks of concrete or marble - or salt," he said.
"It's the 'Lot's life' banking policy," Dr Morgan added, referring to the story of Lot in the Bible.
"Set against banking consolidation worldwide and the globalisation of services, the policy is an anachronism, a woolly mammoth dug from the Siberian tundra and shipped still frozen to Australia as a structure for banking."
Mr Morgan said the banks were arteries of the Australian economy.
"And who wants pillars for arteries," he said.
"To put it bluntly, the Australian majors need scale to compete with global banks that are a growing presence here."
Dr Morgan, who will retire from the bank later this year, was speaking at a Trans-Tasman Business Circle lunch in Sydney.
To a question from the audience, Dr Morgan said he was more confident than he had ever been that the four pillars policy would be abolished.
"I think there is a reasonable chance that in the life of the next parliament, that policy will be relaxed," he said.
Dr Morgan was a senior official of the Federal Treasury before joining Westpac.
Source: AAP