In an alternate universe...

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......)

Why isn't this on the front page?

Just what every bank customer should know about.
http://www.smh.com.au/business/protecting-the-profit-margins-20120130-1qpre.html

Who do you trust?

Our clients sometimes comment that they're asked 'why would you use a mortgage broker?'. Presumably those who ask just go to their banks and trust that they're led in the right direction.

This trust could be misplaced, if you look at the current issues several (all?) banks are facing.

First up, provision of Key Fact Sheets for home loans became mandatory (when requested of a lender by a customer) on January 1. And yet consumer group Choice recently ran a shadow shopping exercise and found that not one bank provided them. Hmmmm....

Next, Bankwest is under fire from disgruntled business banking customers whose loans have been called in early, despite them not being in breach of their loan agreement. Nationals Senator John Williams has called for a federal enquiry into the bank's aggressive policies since its takeover by Commowealth Bank in December 2008. A class action suit is being prepared. Uh-oh.

CBA has also been in the headlines with ASIC very unhappy about recent advertising which advertised home loan rates applicable to Wealth Package holders without disclosing or including the annual package fee of $350. CBA reckon that package fees don't count. (Oh really? I bet the competitors rates shown in the ad included their fees.) The bank eventually backed down in response to what ASIC called "concerns that the rates used in ads were incorrect and potentially misleading".


So, how trustworthy is your bank? 


Some other 'issues' which we have recently resolved with lenders (especially those mentioned here) on behalf of our clients include: refund of overcharged Lenders Mortgage Insurance premium ($1300) to our first home buyer clients and a refund of over $6000 in overcharged interest, which we picked up when reviewing our existing client's home loan. ('Hang on, that's not the loan product we settled for you....').


So, why would you use a mortgage broker again?

It's here at last!

At some times this year, it seemed like it would go on for ever. But here we are at last. And thank goodness.....

Thanks for following us through the year and we look forward to bringing you more news you may not have heard elsewhere, or at least our spin on it, again in 2012.

Wishing you all an excellent Christmas and fabulous New Year. Stay safe and enjoy.

ANZ and the 2nd Friday of each month.

You may have recently heard that ANZ has made a change to when they will review their current home loan interest rates. Commencing on the 2^nd Friday of January 2012 and then on the 2^nd Friday of every month following ANZ will announce any changes in their interest rates.

While this is a change from the current practice announcing rate movements shortly after the Reserve Bank of Australia (RBA), at this stage we don’t believe it should be anything to worry about.

What does this mean for me if I have an ANZ Loan?

In the short term, not much. It adds some certainty, in that you will know exactly when ANZ will announce any changes to your interest rate. However, it will now allow them to move rates outside of RBA announcements. Whilst all lenders have always had this option available to them, until now not one of them has ever done it.

Is it good or bad for me?

It is too early to tell at this stage. Over the last 4 years we have seen quite a few changes with the four major banks now all having different standard variable interest rates which, of course, came about because, in some cases, the full RBA rate decreases were not passed on. ANZ have always been a competitive lender and we’re sure they will continue to be in the future.

Then why did they do this?

One of the main reasons was to uncouple the interest rate movements from the RBA announcements. No doubt they, like most lenders, found the pressure from politicians, the media and the public (especially via social media) “annoying”, for want of a better word. Now on the 2^nd Friday of each month they can quietly (or very, very quietly when rates go up) put their decision up on anz.com which will attract less attention.

OK, so that may be a little light hearted; the other major reason for the change is due to the varying funding costs. The overseas markets, where Australian lenders often borrow money long term to lend to you and I, are closed at the moment and everyone anticipates that when they open back up costs to borrow from these funds will have increased in a very similar fashion to what we saw at the start of the GFC. Until Europe and the Euro settle down these markets will continue to be volatile. By reviewing their rates monthly, ANZ will be able to move rates outside of the RBA announcements and with, perhaps, less scrutiny.

Hold on - the RBA meets on the 1^st Tuesday. ANZ doesn’t announce their rate changes until the 2^nd Friday;  that’s 1,2,3….10 days later!

That is sure to be a good part of the reason for the change. Yes, if rates go down then it is 10 days before you know what ANZ will do and then possibly another 7 days before any changes come into effect. But what about the reverse situation? When rates start going up, you should have all those extra days at the cheaper rate. This is, for us, the most important question. Only time will tell if the increases follow in the same time frame as the decreases. We will be watching this with great interest.

Will other lenders follow?

Not sure at this stage but our gut feeling is that other lenders will wait and see. The RBA doesn’t meet in January and ANZ will make an announcement on the 13^th so it will be interesting to see what happens especially if they move rates up!

We do believe that the general trend for interest rates right now is downwards, however it’s likely that many lenders will not pass on the full RBA rate decreases in the future so the major banks will continue to have differing standard variable interest rates. All this makes it harder for the general public to be able to compare loans between lenders all the more reason to ensure you have a Licensed Mortgage Broker working for you.

As always if you have any questions or concerns contact us, we are always here to help.

This will be our last update for 2011, unless something dramatic happens, so I would like to take this opportunity to wish you all a safe and happy holiday period. We all look forward to assisting you in 2012.

Robert Seton

Managing Director

PS: We have attached the ANZ press release for those of you who maybe interested. Click here.

Early Xmas present - Rates cut

http://www.abc.net.au/news

Illegal bank fees?

A class action brought by 34000 customers of ANZ has been given the green light to proceed to further hearings. It's only a partial win by these customers however gives comfort to customers of other banks. If the courts rule that ANZ's fees for late payments, amongst others, are indeed illegal, we can bet that the other banks will scramble to refund customers before a similar class action is brought against them.

Your bank giving YOU money: priceless!