Will BIG 4 raise rates independently of RBA in next 40 days?

Discussion in 'Property Market Economics' started by Marcus Yuuu, 9th Jul, 2018.

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Will BIG 4 raise rates independently of RBA in next 40 days?

  1. YES

    24 vote(s)
    42.1%
  2. NO

    23 vote(s)
    40.4%
  3. Who cares, credit tightening has screwed me anyways

    10 vote(s)
    17.5%
  1. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    yes and no
     
  3. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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    ? Some will?
     
  4. Lisa Parker

    Lisa Parker Well-Known Member

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    yep - apparently only 1 official rate rise in the coming 12 months on the cards, but I have received a few increase letters this week - very minor adjustments.
     
  5. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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    Hard to imagine ANz not increasing when royal commission slows
     
    jefn89 likes this.
  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    The funny thing about predictions on rates is there's been speculation on an increase for several years now. Rates have gone up and down around regulatory influences, but it's fairly rare that the experts are accurate beyond a few months.

    There's arguments for rates to increase and at some point they will. I don't loose sleep over it though. If a rate increase or two is worrying, then you may be overextending yourself. Fixing loans will mitigate this somewhat.
     
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  7. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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    Too late to fix rates now Pete.. us 10yr near 3% and overnight spread another 50bps of pressure... both of these compressing BIG4 profit margins...

    simple really, what do banks do when it comes to their profit margins? protect them? how..
     
  8. Aaron Sice

    Aaron Sice Well-Known Member

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    By offering credit cards to people that can't repay?
     
  9. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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    Not actually good for profit long term
     
  10. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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  11. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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    the more rates are lifted, the more aussies will struggle as they are not pretty good savers!
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    I've yet to see a bank go broke when they can borrow (take deposits) @ 2% & lend at 16-18% for unsecured loans.
     
  13. Perthguy

    Perthguy Well-Known Member

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    That's actually not true. Some Australians have been saving for a rainy day

    "Households also held a touch over a $1 trillion in cash and deposits at the end of March."​

    Australian households reach record levels of wealth, welfare groups warn of growing divide - ABC News (Australian Broadcasting Corporation)

    That's great for the households holding the $1 trillion and not great for the households that don't.
     
  14. jefn89

    jefn89 Well-Known Member

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    I'd like to add a forth option to this, who cares, if someone is worried and going to financially struggle if rates go up >2%, unlikely but could and at some stage may happen, they probably shouldn't be buying an IP or PPOR. You should, where possible, always have a buffer and if you can't have that avoid buying something too negatively geared.
    To answer your question though it's unlikely the majors will raise their rates too much, it'd be a publicity nightmare given the ongoing royal commission
     
  15. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Banks face cash squeeze as fund managers, households draw deposits



    Australia's banks will be forced to find an additional $70 billion of funding as superannuation funds shift out of cash into international assets while indebted households draw down on their savings.

    The widening of the so-called "funding gap", which measures the difference between bank loans and deposits, comes amid a crisis-like blowout in short-term funding that is increasing bank funding costs and has already prompted the non-major banks to enact "out-of-cycle" mortgage rate rises.

    The gap between loan and deposit growth has increased from $390 billion in the second quarter of 2017 to $457 billion in the first quarter of 2018, resulting in an additional funding bank requirement of $60 billion to $70 billion, according to analysis by National Australia Bank economists.

    The rising financing demands may further increase funding cost pressures, initially triggered by a spike in United States short-term interest rates.

    [​IMG]
    "In my judgment leakage of deposits and cash from Australia's banking system – at an inopportune time when US dollar funding spreads are wider – has been one of the key factors," NAB global head of research Peter Jolly said.

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    the key weakness of Australia's financial system – a reliance on volatile capital markets to plug the funding gap between loans and savings.

    [​IMG]
    Since the financial crisis, in which the reliance on wholesale funding was exposed, Australia's major banks have lifted their proportion of deposit funding from 50 per cent to decade highs of 65 per cent.

    Analysts are becoming increasingly concerned that the banks are now lending money at a faster rate than they are able to gather deposits, increasing the call on the capital markets.

    While official lending statistics show that the banks increased lending by 4.8 per cent over 12 months to May, deposits increased by just over 2 per cent, widening the funding gap. Household deposit growth was relatively stable at 5.6 per cent but financial and wholesale deposit growth, as measured by certificates of deposits, declined sharply over the period.

    "So we have a picture of banks extending credit at roughly the same rate over the past year, but the slowdown in deposit growth has been much sharper," TD Securities senior interest rate strategist Prashant Newnaha said, declaring it a problem.

    [​IMG]
    He added that the slowdown in deposit gathering, which began in June 2017, "has played a key role in the subsequent rise in cost of bank funding".

    The banks faced two choices in response to slowing deposit growth – either lift deposit rates, or increase their use of the capital markets to meet demand for credit as their loan books have swelled to $2.6 trillion.

    "Either measure should result in higher cost of bank funding," Mr Newnaha said.

    The unusual increase in short-term funding costs is evident in a range of interest rate derivatives and money market rates.

    [​IMG]
    The 90-day bank bill swap rate, which measures three-month cost of borrowing, increased to as high as 2.12 per cent last week. That rate is 60 basis points above the 1.5 per cent official cash rate setting, triple the typical premium of 20 basis points.

    This is a problem for the banks because the higher short-term borrowing costs eat into their profit margins if lending rates remain unchanged.

    The nation's smaller lenders, which are more sensitive to changes in short-term funding rates, have already responded by increasing mortgage rates by as much as 17 basis points.

    Mr Newnaha also pointed to the fall in the household savings rate, which had reached as high as 10 per cent during the financial crisis but had declined to 2 per cent, as another reason to expect deposit growth to slow.

    "The prospect of higher Australian mortgage rates, just as property price growth slows and moves into negative territory in certain areas, along with low wage growth means the Australian savings ratio is unlikely to turn higher any time soon."

    In recent years Australian households have increasingly financed consumption by drawing on their savings.

    "Now there is clear risk that a larger proportion of household income will be directed towards servicing higher mortgage repayments."
     
  16. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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    Hmm interesting thanking you
     
  17. marmot

    marmot Well-Known Member

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    Even heard an ad on radio last week from westpac with their "special" new intro rates for their E saver accounts.
    Haven't heard them advertising e saver accounts for a long time.
    And in other news Westpac is also pulling out of lending for property in SMSF for new customers
     
    Last edited: 16th Jul, 2018
  18. Marcus Yuuu

    Marcus Yuuu Well-Known Member

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    More credit tightening...
     
  19. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    STG had a poofteenth of the SMSF market due to silly rates

    ta

    rolf