banking deregulation didn't happen and the government controls the interest rates charged by all banks. The variable rate is 8.5% in 2012.There are no basic variable loans, no lines of credit, investment loans cost more and you need to book an appointment with your bank manager three months in advance.
This is because there is no competition, since all banks charge the same rate. Why try to be different?
In this, our actual universe, the government has no say at all in what the banks do with their interest rates. It's a double edged sword of course; if banking hadn't been deregulated in the '80s, there wouldn't have been the type of innovation that has driven the Australian mortgage market to be one of the most sophisticated in the world.
With deregulation, though, we are somewhat at the mercy of the banks' bottom line. (How many times do we need to say it? The only way to win with a bank is to be a shareholder, as that is clearly where their focus lies.)
Sorry but in this universe, the government can only use the media to try to shame them into 'doing the right thing' by their borrower customers.
Of course, doing the right thing for these customers is a completely different animal from doing the right thing by investor customers and/or shareholders.
And, at the end of the day, the interest rate is important but it's not the only thing. (If you don't get this, come see us......)
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ReplyDeleteHmmm. Unfortunately some of that doesn't apply in Australia. The above comment must be from the US, where adjustable-rate mortgages is the term used for our variable rate loans. We don't have balloon mortgages here either. Still, nice to see someone's reading!
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