Commbank says no to mortgage interest rate cut

The Commonwealth Bank's chief executive Ian Narev has ruled out a rate cut independent of the Reserve Bank in the short-term.

The major banks have increased mortgage rates relative to the Reserve Bank's cash rate since the onset of the financial crisis, by lifting rates when the Reserve has kept them on hold, increasing them by more than the RBA's cash rate rises, or not passing on the same percentage point reduction as the RBA when official rates have fallen.

Westpac's chief executive Gail Kelly and Mr Narev had both intimated previously that their banks will eventually reduce their mortgage rates relative to the cash rate as funding costs ease.

However, speaking to AM, Mr Narev says funding costs remain high, meaning that a potential home loan rate reduction relative to the Reserve Bank's cash rate will have to wait.

"You've got to bear in mind that what puts pressure on our wholesale funding is the cost of new funding relative to the cost of the funding it replaced, which isn't usually funding from a month ago, it's funding from two or three years ago, and that continues to go up," he said.

"The other factor we've got here is that deposit competition is increasing and, as I said before, depositors do well, but that does continue to put pressure on our deposit pricing so, as we sit today, unfortunately we're not at the end of a cycle where funding costs are going up."

Ian Narev says that situation is unlikely to change in the short-term while volatility and uncertainty about Europe's economic future reigns.

"We think there must be a solution, it involves greater integration, but we can't see how that solution's going to be workable politically and I continue to hold that view today. And I don't think that uncertainty's a good thing for the global economy or indeed the economy here in Australia," he observed.

"So, we don't foresee a big disaster in Europe, although that is a possibility, but at the same time we can't really see yet what the catalyst is going to be for a significant improvement."

However, despite the prospect of mortgage rates remaining high relative to the cash rate and the bank's record $7.1 billion profit, CBA's chief has brushed aside calls for a another banking enquiry.

"We do think it's a very competitive banking system, so I don't think you need an enquiry to tell as that. And indeed we've had various versions of enquiries trying to get at that and, I think what I've said before on the impact on margin shows that it is competitive," he added.
"But there are legitimate questions about Australia's long-term funding that need public debate and, if the way to do that is through an enquiry, then we would be happy to participate in that."

Source: Mr Mortgage 

Credit card scam: Half a million Credit Card numbers breached in Australian Point-of-Sale Hack

Australian Police are investigating a breach of half a million credit card numbers by the same gang that struck the Subway restaurant chain in the United States.

The credit card hacking intrusion occurred at an unidentified merchant in Australia and is being blamed on Eastern European hackers who installed keystroke-logging software on point-of-sale terminals (POS) and siphoned card data from the terminals remotely, according to SC Magazine.

The company’s network used default passwords and stored unsecured transactional data. The gang allegedly used an unsecured Microsoft Remote Desktop Protocol (RDP) connection to transmit the data.

"The network was setup by some local suppliers who didn’t understand IT security,” Det. Sup. Marden told the magazine. “It was a disaster waiting to happen.”

The hackers are believed to be members of the same Romanian group that was responsible for hacking 150 Subway sandwich shops and other unnamed retailers in the U.S.

Last December, four Romanian nationals – Adrian-Tiberiu Oprea, 27; Iulian Dolan, 27; Cezar Iulian Butu, 26; and Florin Radu, 23 — were charged in the District of New Hampshire with four counts related to those hacks, including conspiracy to commit computer fraud, wire fraud and access device fraud. The indictment also referred to two unindicted co-conspirators who used the online nicknames “tonymontanamiami” and “marcos_grande69.”

Few details have been released about the credit card hack in Australia, but in the Subway case, the hackers compromised the credit-card data of more than 80,000 customers and used the data to make millions of dollars of unauthorized purchases, according to authorities.

From 2008 until May 2011, they allegedly breached more than 200 POS systems in order to install a keystroke logger and other sniffing software that would steal customer credit, debit and gift-card numbers. They also placed backdoors on the systems to provide ongoing access.

POS systems generally consist of a card scanner at a checkout register where customers scan their cards and type in a PIN or provide a signature, as well as a computer system for transferring the data to a card processor for verification and approval.

The indictment didn’t identify the POS system used by Subway, nor does the news from Australia indicate the brand of terminal attacked in that breach, but Subway announced in January 2009 that it was deploying the Torex Quick Service POS in all of its 30,000 restaurants.

The Subway case shared similarities to what occurred to seven U.S. restaurants that sued the maker of a POS in 2009 for failing to secure the product from a Romanian hacker who breached their systems.

Australia's Housing Shortage: Is it just an urban myth?

I have been accepting as "fact" for 8 years that Australia has a housing shortage. But what if that was not the case. Would you still buy a home? Is that the question?
Investment Banker Mortgage Stanley recently released research that pointed to Australia actually having a glut of housing, rather than the much touted housing shortage we have all heard about that keeps growing like an evil magic pudding.
Admittedly, I have heard about this housing shortage since 2003 and wondered where all the tent cities were being erected in Australia to justify these claims.
Maybe we will see fake one's sprouting up all over Australia soon?

Housing Shortage, Fact or Myth:Australia goes from an estimated 228,000 housing shortfall to a 341,000 home glut in the time it takes to produce a report!

So how did we get this 569,000 housing turnaround in weeks?

There has to be a reason that house prices have not collapsed in the wake of the GFC.

The estimated 228,000-home shortfall, cited by everyone from the construction industry to economists at the major banks as evidence for why prices remain so high, may, in fact, be an excess of 341,000 homes, according to Morgan Stanley.

Whether the new figures are accurate will only become clear in time, as house prices either level off because real estate is scarce, or prices fall and attract more scrutiny about the fundamentals of the market.
But what if there are other reasons why home prices are staying high in the gloom. Here's a few.

1. Real estate is worth what someone else will pay you for it. People have not been willing to pay what many buyers want, but...
2. Real estate is also worth what you are prepared to let it go for if you are selling. When people have not been able to sell at the price they want or even need, they are hanging on to it.
3. If you have a job you can afford the mortgage till things come good. In Australia's case the job market never went bad, so people can hang onto property for longer.
4. If you hang onto to the old property, then real estate agents are not going to be happy, because you don't effect your sale, and you therefore can't buy the next home. This is exactly what is happening.
5. People are now hanging on to their homes longer and their mortgages longer.
6. From a generational point of view, people are living longer and staying in their homes for longer. And the Government assists this with carers and other services to help people stay out of nursing homes longer.

But the all-important nature of house price movements underscores a bigger issue: we simply don't know what impact elevated property prices have on other aspects of the economy because we don't have a long history of clean, robust and comparable data to rely on.
But I will give it a try here.

1. When you pay too much for a home, you have to hang onto it for longer or risk going underwater.
2. When you pay too much, your mortgage is bigger than it should be. That makes banks happy and rich and that means that you pay more of your income in mortgage repayments than you should be, for the next 30 years. That causes a thing called mortgage stress. As these things have happened then we can say people have paid too much for their homes in the recent past.
3. Are they still paying too much? That will be clear in 2 years time. If prices go down, then yes they are still paying too much today.

In Australia, there is no clear, undisputed authority of information in this area crucial to the economy.

In the US, the S and P Case-Schiller index, which measures changes in prices of the same properties over time, and that is only 25 years old. So where do investment gurus pull 100 year figures from?
The problem I have with any long range figures is that they only rate the homes that are still standing,and over 100 years maybe more than half the housing stock may be demolished. SO counting just the best ones that are left is a hardly a way to determine the appreciation of housing generally. Its taking a generalisation and making it specific. But what about the home that was bought, and later demolished. Surely its worthless. When these homes are included in the overall picture, actual returns are lower.

In Australia, Residex's repeat sales index goes back to 1991, in the middle of a Sydney house price correction on 17% pa interest rates just before the two-decade run-up in house prices began.

One thing for certain is that it is unwise to expect the "boom conditions" to persist indefinitely. That is a interesting term. I thought the boom finished in 2003 and we got ripples in 2006, and last hurrah in 2010?

In 2010, Reserve Bank governor Glenn Stevens appeared on breakfast TV to warn viewers it was a mistake to ''assume a riskless, easy, and guaranteed way to prosperity is just to leverage property''.
That advise I was giving out from 2005, but nobody wanted to listen back then. That's why home prices went too high. Are they still too high. Well RBA Governor Stevens says no, they are not.

Source; Mr Mortgage

Credit card fees: Visa & Mastercard deal may not help stores recover charge fees & costs

What appeared to be a clean 'n' sweet credit card fees deal may have opened a can of worms, in some States, and with convenience stores [low value transactions.]

Stores and e-tailers may not find it easier to charge shoppers fees for paying by credit card as a result of a $7.25 billion class action settlement with Visa and MasterCard, which might delay or sabotage its approval, an analyst said on Monday. And larger retailers are saying that they don't want to make extra charges.

The Proposed Visa Card and MasterCard settlement

The proposed settlement between retailers and the two biggest credit card companies would resolve class action stores' claim that Visa and MasterCard conspired with major banks to fix swipe fees, the amount paid to process debit and credit card payments.

In addition to a $6.05 billion payment and temporary $1.2 billion swipe-fee reduction, the deal would also allow stores to start charging so-called checkout fees to customers who pay with MasterCard or Visa credit and debit cards, to defray their costs From Visa, MasterCard and Banks for using credit cards.

But retailers might not in reality get much help from the deal in offsetting the credit card swipe fees by charging customers more.

The settlement's much-touted credit card surcharging provisions actually have no real usefulness to merchants.
Because buried in the fine print of the agreement are provisions that undercut the stated intent of the settlement.

For instance, if retailers force customers to pay more for using Visa or MasterCard, they essentially must charge consumers more when they pay using other credit card networks, such as American Express, according to Bouregois' analysis of the proposed settlement.[not part of the claim or settlement]

But American Express prohibits merchants from implementing policies that discriminate against its cards, like discounts designed to steer customers to different forms of payment. Although this may be unlawful I feel.

The credit card settlement is also subject to approval by a federal judge.

The surcharge rules will also not apply in the 10 states that prohibit that practice, including Texas, California and New York.

Credit Cards increase sales

This could undermine the settlement if merchants voice their objections to this provision during fairness hearings prior to the court's final approval.
Some stores have said they will not impose extra fees for paying with plastic, even if they can.
One of the largest U.S. retailers, Target Corp., issued a statement Friday saying it did not intend to impose checkout fees, and calling it "bad for both retailers and consumers."

The National Association of Convenience Stores believes the deal does not address convenience stores merchants long-standing concerns over how Visa and MasterCard set credit card swipe-fee rates.

Credit Cards Fees: Retailers have a few options

The settlement would give retailers a couple of different options should they choose to pursue checkout fees.

For instance, stores could choose not to assess the fees, or if they did, they could re-examine their agreements with competing credit card issuers or even drop those other cards altogether, he said.

The settlement agreement should now give freedom to merchants to make those choices that they think are in the best interest of their business and their customers.

Because the value merchants get from MasterCard acceptance is far in excess of the actual cost of acceptance, so merchants would not have to impose credit card use checkout fees, as the costs have been taken care of.
Source: Mr Mortgage

Mortgage Rates : How Mark Zuckerberg lowered his mortgage interest rate to 1.05%

My first question is how come the 40th richest man in the World needs a mortgage home loan in the first place? 

My second question is why is his mortgage interest rate so low? The answer to the first question may be that he is paper money rich? 

Many of super rich count money that is not fold-able, see-able or actualized yet. An example is shares that have never been bought or sold. That money has never been realized. Its in assets that can be converted into money. Its like the TV program Deal or No Deal. Until you take the deal, its just a number on the board.

Or maybe that he can do better than 1.05% by investing that money instead. 

If someone worth over $15 billion needs to make money on his money, then is that just plain greedy? He probably wants that money to be free and maybe even wants to know what's it like to have a mortgage like normal people.

So did Mark Zuckerberg get such a low rate? 

Here's my take.
1. Its a no risk loan. Every time your bank makes a loan it has to factor in risk that makes up part of the mortgage interest rate.
In Australia that's a low risk, because less than 2% have any default, and less than 1% go into serious default.
So lending to one of the Richest men in the World, who's fortunes are still on the rise, is a no-brainer.
2. Scarcity. The loan is secured against his home in Palo Alto. Homes there were never affected by the GFC. High tech still boomed, and even average homes there go for over a million, so the security is likely to appreciate.
3. Prestige. Everybody in the World knows who Mark Zuckerberg is. And its not a common name.
Question. Name anybody who is the 20th to the 50th Richest persons in the World. Off the top of your head that would be hard. But even if you Googled and found the list, would you actually know any of them? They don't have the pulling power of Mark Zuckerberg do they?
The point is that the bank gets a great great boost of this publicity by the prestige of the customer. Its called name-dropper.

You might be thinking. Maybe I too can score a low interest rate mortgage, just like Mark Zuckerberg. You would probably be wrong. But you do see the value of having a high profile customer and a low rate, right?

4. Where does Mark Zuckerberg stash all his lose change?
Maybe in the same bank that holds his mortgage? I think so. If I were his bank I might be tempted to give him a 0% interest free mortgage, just as a stunt. That would make even bigger news. Don't forget, one percent of $6 million is only $60,000 a year, so hardly a big deal in the scheme of advertising these days. So whilst Mark Zuckerberg's mortgage interest rate deal may be an example of the rich getting richer, the fact is that this is a no risk deal for the bank, and an opportunity to get "free" publicity for his bank. His bank is assured a return regardless of what the housing market in the US does. Can you say the same for your home, your income prospects and your advertising pulling power?

Source: Rick Adlam, Home Mate

Retailers & e-tailers win credit card swipe fee war against Visa, Mastercard & Banks

Entrepreneur Mitch Goldstone lead fight with credit card giants Visa and MasterCard for 7 years to help reach a $7.2-billion settlement over transaction fees.

Mitch Goldstone of ScanMyPhotos was a lead plaintiff in antitrust litigation against Visa, MasterCard and the banks that issue their cards over credit card "swipe fee." 

Visa, MasterCard to pay $6 billion to settle retailers' lawsuit

Most small-business owners regarded the rising fees they paid to Visa and MasterCard as an unavoidable cost of doing business. Not so photo processor Mitch Goldstone. He saw it as a ripoff.

Contending that a price-fixing cartel was exploiting him and other entrepreneurs, Goldstone went to war in media interviews, blog posts and as a lead plaintiff in a giant class-action lawsuit, comparing the payment processors to drug pushers and to the railroads that profited at the expense of farmers.

What Goldstone calls his "Erin Brockovich moment" arrived with last week's $7.2-billion settlement with Visa, MasterCard and the banks that issue their cards after seven years of antitrust battles in federal court in Brooklyn, N.Y. The agreement will shift power to sellers of goods and services and could transform how — and whether — millions of Americans use their credit cards.

The agreement also allows Retailers to charge customers to recover costs.

Now Visa and MasterCard have agreed for the first time to bargain with groups of retailers over credit card fees, so small businesses can team up to gain leverage.
The agreement also allows merchants for the first time to charge customers extra for using credit cards, so long as the charges reflect the actual cost and are broken out clearly for consumers to see.

That would drag the processing charges — formally known as interchange fees, colloquially called credit card swipe fees — into the light, so consumers can finally see how costly they are to the businesses they patronize.

"If you ask customers what's an interchange fee, they'll say it has something to do with a freeway," Goldstone said. "And millions and millions of merchants just accepted it as a cost of doing business."

The interchange fees are complex as well as arcane. The latest version of MasterCard's online rate summary, current as of April, runs 131 pages.

The Federal Reserve last year cut debit-card fees from 44 cents to 21 cents per transaction. But credit-card fees run much higher, especially for popular rewards cards, averaging 2% of a purchase price and reaching 5% for minor purchases from small retailers — a cost most Americans have been blissfully unaware of.

Goldstone says the ability to bargain collectively will gradually bring down card costs for retailers, who in a competitive environment will pass along the savings to customers across the country.

Imposing credit card surcharges is trickier. For one thing, the practice is banned in 10 states including California, although the Golden State makes an exception for gas stations.

A recent California Supreme Court decision that federal law preempts state laws dealing with credit cards means that courts could nullify the state ban on surcharges.

Many retailers say credit cards are king these days, despite efforts by some jewelers, spa owners, movers and even dentists to entice shoppers to pay with cash.

Goldstone thinks few merchants will impose surcharges but says the threat will force the card companies to lower their fees. "The balance of power is going to shift very fast," he said.

That would be a distinct contrast with the situation in 2005, when digitizing old snapshots became so cheap that his 30 Minute Photos shop slashed its charge to scan a picture from $5 to 15 cents.

Technology also was transforming credit card companies, with electronic transfers replacing manual imprint machines and carbon-copy receipts — yet the rates Goldstone paid the payment processors were rising.

"I kept asking Visa and MasterCard if they'd charge me less," he said, "but they wouldn't even call me back to discuss it."

Now that the interchange war is over, Goldstone says he will devote time to nonprofits, creating a foundation that will monitor the credit card industry and a group that will lobby small businesses to support President Obama.

Credit Card Skimmer caught: Protect your credit cards by checking accounts for fraud.

The new rules for getting credit card fraud at bay. Never let that card out of your sight, and check your account constantly for suspect charges.

Think twice before using your credit cards for low cost transactions where low paid workers serve you.

A Chicago man pleaded guilty Tuesday to organizing an ATM “skimming” ring that stole more than $200,000 from diners using bank or credit cards at restaurants and attractions across the city, including Wrigley Field.

Joseph Woods, 32, pleaded guilty to felony conspiracy to commit a financial crime before Cook County Circuit Court Judge Diane Cannon, who sentenced him to five years in prison, according to the Illinois Attorney General’s office, which prosecuted the case.

Woods organized an identity theft and bank fraud scheme which “skimmed” information from credit cards at several restaurants, including RL on the Magnificent Mile, Taco Bell, McDonald’s and a food vendor operating at Wrigley Field, according to a release from the attorney general’s office. More than $200,000 was stolen using the victims’ bank and credit cards.

Food Service employees accepted payments to commit the credit card skimming fraud.

Woods paid employees of the restaurants and eateries to skim customer credit card information using a small card reader provided by Woods, prosecutors said. Employees would swipe customers’ cards, giving Woods access to account information, with which he created counterfeit credit cards and made phony purchases.

Compromised in the scheme were accounts from Chase, U.S. Bank, Citibank, Harris Bank, American Express, Bank of America and Fifth Third Bank, all of which assisted in the investigation and notified potential victims.

Co-defendants in the credit card skimming fraud have cases pending.

Skimming operations are a growing threat to your credit card account.
To protect yourself:

1. Consider using cash for mall transactions to minimize credit card use especially on low cost transactions.
2. Use a debit card for these transactions.
3. Check credit card bills and financial statements regularly for unauthorized charges.
4. Report any suspect charges to your bank immediately.
5. Never allow your card out of your site. never hand your credit card to the waiter at your table. Insist on paying at the the counter so you can see the transaction.
6. Remember that even then the card reader may be swapped by the skimmer gang. so the debit card is always the safest way to go. You can only be cleaned out for the amount you have on the card at the time.

Rick Adlam: Mr Mortgage

Credit card fees: Excessive surcharges to be banned

The Reserve Bank of Australia is urging business owners and operators to get ready for the ban on excessive credit card fees, to come into effect in January 2013

Taxis, Restaurants, Tourism and e-tailers are the worst offenders of credit card excessive charges

A Reserve Bank of Australia ruling to limit credit card surcharges to a "reasonable cost of card acceptance" will come into force on January 1st 2013.
The RBA had noted a large rise in the number of businesses levying card charges, with taxis, restaurants, tourism operators and e-tailers among the worst offenders.
The RBA says large businesses are the most common surchargers, but the proportion of small businesses that charge for card use has grown from about 4 per cent in 2005 to 25 per cent today.

The National Australia bank already working with Business Owners

NAB's David Gall says business owners will need to speak with their bankers. "Businesses that accept cards need to know what the cost of accepting cards is and the reasonable cost of surcharging," he says.
Processing costs can vary dramatically but are typically between 0.5 per cent and 2 per cent of the transaction cost.
NAB has introduced a more transparent credit card billing approach for its 120,000 business customers and Gall says it has been well received.

 "Merchants now receive a monthly breakdown of the fees charged by card issuers, allowing them to understand exactly how their monthly bill is made up" he says. The RBA will accept submissions about its surcharge plans before Friday. 

 It has received concerns that some businesses are using credit card surcharges to slug customers,rather than recoup the cost of accepting cards.

House Prices collapse deflated US household net worth

Since the sub-prime home loan bubble burst in 2007 causing house prices to fall 40%, Americans have suffered a record decline in household wealth to 1992 levels

According to a Federal Reserve report on the recent recession, the median family's net worth dropped nearly 40 per cent during the three-year period, and this is linked directly to declines in house prices.
This was the biggest drop in net worth since the survey started in 1989.

House equity linked to net worth?

The problem I have with this notion is that the family home should never be viewed as an investment, and no self respecting financial planner would use the family home as a gauge of personal wealth.

Household wealth in the US now stands at 1992 levels as house prices slid

The median net worth, [the value of assets less debts], plunged from $126,000 to just $77,300 in 2010 , which brings it thudding back to 1992 personal wealth levels. These figures also show that most people's "wealth" is tied up in their homes. Which says a lot for the real wealth of people in the US.

Personal wealth in the US appears to be a mirage, if you accept the notion that a home should never be included in a net worth sum.

"Housing was of greater importance than financial assets for the wealth position of most families," the Fed said.
"A substantial part of the declines observed in net worth over the 2007/10 period can be associated with decreases in the level of unrealized capital gains on families' assets," the Fed said.
"The share of total assets of all families attributable to unrealized capital gains from real estate, businesses, stocks, or mutual funds fell 11.6 percentage points to 24.5 per cent in 2010," it said.

We must be forget that many in the US used their homes as cash machines and extracted all the equity from them to fuel their lifestyles, so they would have suffered hard, and many of those would have lost their homes or had their net worth under water.

Household debt levels overall are unchanged

While the overall level of debt owed by families was unchanged, debt as a percentage of assets rose to 16.4 per cent in 2010 from 14.8 per cent in 2007 because the value of the underlying assets, especially housing, decreased faster.

People shed credit card debt.

The share of families carrying a credit card balance fell 6.7 percentage points to 39.4 per cent in 2010. The median balance fell 16.1 per cent to $2,600 in 2010 from $3,100 in 2007. The proportion of families with debt payments greater than 40 per cent of their income was nearly unchanged between 2007 and 2010. These were obviously people who were caught in the debt trap but retained their jobs.
People have hitched their wagon to house prices always appreciating, as a way to built net worth. This is faulty thinking in my view, and why the US housing market has not recovered. It is simply seen as a bad investment, instead of what it is, Place to live and bring up a family in a stable environment.
 Mr Mortgage

Payday Lender: 5 year ban from the Industry for unlicensed lender

Australian unlicensed payday Lender get 5 year ban from the Industry by ASIC

The Australian Securities and Investments Commission [ASIC] has handed a five-year ban to an unlicensed payday lender, saying unlicensed lending poses a risk to the public.

Banned payday lender named

Victorian payday lender Victor Manatakis has been banned by the regulator after an investigation uncovered that his business was conducting credit activities without an ACL.
Manatakis's business, Billpal, was the operator of payday lending business Cashpal.
ASIC found that between August and October of 2011, Billpal issued credit contracts despite the fact it held no licence.

Unlicensed lending could pose a risk to the Public

ASIC commissioner Peter Kell said the unlicensed lending could pose a risk to the public.
"People in the consumer credit industry need to be aware of the licensing requirements and the implications they will face if they fail to meet these requirements," Kell said.