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:

• 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.

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.

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.

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.

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.

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.

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.

The future is very uncertain and it is neither sensible nor realistic to
try to predict the future

The 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.
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.

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.

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.

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.