Banks hit credit card rates hardest
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Research by InfoChoice shows that banks have increased their standard variable mortgage rates by around 1.4 per cent since the credit crunch began in late July last year, however greater flexibility in pricing of business loans has seen those rates jump by 1.5 per cent or more over the same period. While movements in the cash rate by the Reserve Bank account for much of the higher rates, the five largest banks have added between 0.37 and 0.4 per cent to their mortgage rates on top of the official increases as they seek to recover higher funding costs. Over the same period rates on some credit card products have been lifted by more than 2 per cent.
Source: The Australian Financial Review
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Business outlook down but wage pressures up
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Wages are expected to show strong growth over the next 12 months with the NAB reporting that a record 72 per cent of firms participating in their business confidence survey are having difficulty finding suitable workers. NAB group chief economist Alan Oster said that while there has been a down-turn in trading and profits the same could not be said of employment. "Confidence has come down but I'm not sure that they (businesses) will fire anyone because it's more difficult to get suitable labour today than at any time since we started collecting data in the late 1980's," he said.
Source: The Australian
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Higher rates inflate inflation figure
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Analysts are calling on the Reserve Bank to take the effect of higher interest rates into account when considering how to respond to an inflation rate of 4.2 per cent when it meets to review the official cash rate next week. Information for the Australian Bureau of Statistics shows that higher interest rates and bank charges added 0.2 per cent to the annual inflation rate which had been expected to come in at 4 per cent. The higher than anticipated result dashed any hopes of interest rates being cut this year. AMP chief economist Shane Oliver described the situation as "very perverse". "Interest rates have gone up, which in turn has added to the risk of another rate hike. So you have this kind of circular effect going on," he said. CommSec analyst Craig Jones points out that higher rates have also slowed house building activity which in turn is causing rents to soar which then forces inflation higher.
Source: The Daily Telegraph
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Confidence lowest since tech wreck
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Business confidence has taken a beating in the face of the global credit crunch, sharemarket volatility and high interest rates. The latest survey of 500 businesses conducted by NAB reports a 10 point drop in the index measuring confidence about the June quarter, to be at levels similar to the global technology stock crash in 2000 and 2001. Key retailers are growing anxious about the effect of interest rates on consumer spending and confidence is particularly low amongst businesses in the finance, insurance and property services industries.
Source: The Australian Financial Review
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No relief from rocketing rents
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Rents have risen by about 7 per cent over the past year but are expected to rise further with the building cycle not expected to pick up until 2009/2010. Although rents have been rising they have not kept up with rising house prices. Rental yields were around 5 to 6 per cent in the mid-1990's but fell to about 3 to 4 per cent during the property price boom later in the decade. Many investors were happy to offset lower rental yields with increasing property values but capital gains are no longer certain. RBA deputy governor Ric Battellino said that it's hard not to draw the conclusion that rents will experience further substantial adjustment before stabilising.
Source: The Australian
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Westpac joins rates charge
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Westpac has followed the lead of rivals NAB and ANZ by increasing its variable mortgage rates 10 basis points. The move means that a standard variable rate loan at Westpac now carries an interest rate of 9.47, the same as St George and ANZ, while NAB is on 9.46 and CBA's rate is 9.44 per cent. Westpac said that it had to balance the needs of both customers and shareholders but long term funding costs were at record levels and continuing to increase.
Source: Sydney Morning Herald
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Aussie banks lag on technology
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Australian consumers don't have access to many services that have been available in Asia for years due to a lack of investment in new technologies. Customers in Hong Kong can switch their mortgage between global currencies to take advantage of fluctuations or use their online bank account to trade gold, shares, currencies and mutual funds, pay tax and utility bills, buy insurance, and subscribe to initial public share offerings. In Cambodia you can buy credit for a prepaid mobile phone from an ATM, a service which is still not available in Australia. The banks say that their ATMs are capable of more complex transaction a Commonwealth Bank spokesman, Marcus Judge, said customer surveys show that reliability and accessibility is more important than additional services. ANZ chief Mike Smith, previously head of the group's Asian operations, has said that the four pillars policy had created an internal looking and somewhat parochial view but that the ANZ will be moving toward an integrated online banking model.
Source: The Australian Financial Review
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Banks want more value from brokers
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No firm announcements have been made yet, but the ANZ and Commonwealth banks are warning mortgage brokers that they may have no other choice but to follow Westpac's lead in slashing commission levels. ANZ chief Mike Smith said that he can only see commissions going down while CBA spokesman Brian Fitzgerald said the rising cost of credit would force a review. National Australia Bank is taking a different approach and is seeking support for a model that would see brokers become broader financial advisers. The bank says that it does not intend to cut the headline commission rate, but will provide incentives to brokers who cross-sell other NAB products such as insurance.
Source: The Australian
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Non-bank lenders seek shelter
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Financing new mortgages is not going to get easier any time soon for non-bank lenders with FirstMac predicting that it will not be able to sell mortgage backed bonds for another two years. Kim Cannon, chief executive at the lender said that they are not assuming that their business will come back until 2010, and if it does come back sooner then that's a bonus. Bluestone Group is also bunkering down for a while with chief executive Alistair Jeffrey saying that the lender would "hibernate its origination side and preserve its brand", instead focusing on its ability to manage distressed assets. The last successful sale of a mortgager-backed bond issue was by Bluestone in December last year.
Source: Sydney Morning Herald
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Administrator says Opes traded while insolvent
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The ANZ Bank, chief financier of failed margin lending group Opes Prime, could be left in the cold as a report from administrators found that the company was already insolvent when they were called in last month. The finding has increased the possibility that charges placed over the company's assets by the bank will be declared void and directors could potentially be exposed to compensation claims. ANZ took out a charge over $800 million worth of assets in exchange for $95 million in emergency funding a week before the collapse but has not yet had to use that arrangement yet. The bank is selling off Opes Prime's share portfolio in an attempt to recover its debts of $650 million but had advised the administrators that the sale may leave a shortfall.
Source: The Australian Financial Review
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