Australian Housing Market Outlook

Posted on April 22, 2009 by peter 
Filed under Australia Real Estate News · Tagged: , ,
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John Symond, gives his views on the state of the Australian Residential property market. He discusses the future of the first home owner grant and talks about why the big 4 banks are justified in not passing on the latest interest rate cut in full.

National Australia Bank won’t pass on interest rate cut

Posted on April 15, 2009 by peter 
Filed under Australia Mortgage and Finance News · Tagged: , , , ,

Despite Treasurer Wayne Swan trying to ramp up the pressure on the banks, The National Australia Bank  is still defying the Government by refusing to pass on any of the latest official interest rate cut, despite Treasurer Wayne Swan accusing it of endangering economic recovery.

The other thee of the ‘big four’ banks – ANZ, Westpac and St George fell into line with the Commonwealth Bank, who agreed to pass on 0.10 points of the Reserve Bank’s 0.25 point cut. Westpac also undertook to pass on the full 0.25 points to business and credit card customers.

Smaller lenders, including the Heritage Building Society and agribusiness lender Rabobank, passed on the 0.25-point cut in full.

Speaking on the radio, Mr Swan said NAB’s approach was “not helpful when we’re trying to get everyone in the community working together to deal with the global crisis”.

Finance Minister Lindsay Tanner opened up the possibility of withdrawing privileges from the NAB, saying there were “potentially other things we can do, but there are also downsides to those things”.

He and the Treasurer would apply pressure to the bank in private, “but we are not going to do it in public”.

Opposition Leader Malcolm Turnbull said Mr Swan should consider threatening to remove the NAB’s Government guarantee. “The banks have had unprecedented support from the Government,” he said. “They benefit from a deposit guarantee, they benefit from a wholesale term funding guarantee, and despite all of that assistance they don’t seem to pay much attention to the Prime Minister.”

Mr Swan ruled out threatening to withdraw guarantees, saying it would “rebound not just on the banks but on the Australian economy”.

NAB defended itself late yesterday putting out a statement saying that “between September and February NAB passed on more of the Reserve Bank’s cuts than any of our major competitors”.

But the accompanying table showed that wasn’t true for cuts starting in September, with the Commonwealth Bank cutting deeper than NAB and offering rates 10 points lower.

The difference amounts to $18 a month on a $300,000 mortgage.

Consumer organisation Choice blasted each of the big banks that had failed to pass on the cut in full saying the only reason the Reserve Bank cut rates was so the banks would pass on the cut. “But it’s very hard to shop around, and hardly worth it for 10 points when the rates might change again soon,” said spokesman Christopher Zinn.

“This is really the birds coming home to roost. The Government allowed the big banks to take over mid-tier banks such as St George and BankWest. Now there’s very little competition.”

Figures released separately yesterday showed banks accounted for a record 92.4 per cent of new mortgages taken out in February.

“This is the highest market share ever recorded by the banks,” said Coalition housing spokesman Scott Morrison. “At a time when people are asking why banks are not passing on rate cuts it is worth noting that the level of competition in home lending has also reached its lowest level on record.”

The number of new housing loans climbed again in February for the fifth straight month since the Government announced a boost to the first home owner grant.

A record 16 per cent of the new loans were for first home buyers.

Consumer confidence also improved in what Westpac economist Bill Evans said was most probably “a further positive response to the fiscal stimulus package”.

Interest rate cut not passed on in full by the big 4 banks

Posted on April 8, 2009 by peter 
Filed under Australia Mortgage and Finance News · Tagged: , ,

Australia: Following the reserve banks decision to cut the cash rate by25 basis points (0.25%) yesterday, the big 4 banks of Australia have decided not to pass on the full rate cut to borrowers – a decision which has angered federal and state governments, not to mention, consumers.

Westpac, along with the ANZ, has cut its standard variable home loan rate by 10 basis points (0.10%), in line with a similar move by the Commonwealth Bank of Australia.

interest_rateWestpac is the last of the Big Four banks to respond to the Reserve Bank’s rate reduction yesterday.

National Australia Bank, stands alone out of the big 4, with it’s decision to not pass on any of the cut to it’s borrowers – leaving its standard variable home loan rate unchanged.

From April 20th, Westpac will charge 5.81% on their standard variable loan. ANZ will have the same rate, effective from April 17.

”Westpac continues to manage the challenging funding conditions with careful consideration of the deteriorating economic environment and the impact on our customers,” Westpac Group Executive, Retail and Business Banking, Peter Hanlon said.

Yesterday, CBA said it would cut its standard variable mortgage rate by 10 basis points to 5.64%, effective April 17.

National Australian Bank has said it would not cut rates because of the high cost of wholesale funding. Its variable rate stays at 5.74%.

The big four have resisted calls from Treasurer Wayne Swan for them to pass the 25 basis-point cut on to customers. Banks that don’t pass on the interest rate cut need “a good kick up the bum”, according to Federal Treasurer – Wayne Swan.

Victoria State Premier John Brumby added his voice to calls for the big banks to pass on cuts in interest rates to borrowers today, saying, “The banks need to do this, there needs to be more competition in the market, and I’m quite disappointed these reductions haven’t been passed on,”.

Prime Minister Kevin Rudd also urged banks to reconsider their decisions.

Moving the lending rate from 5.91% to 5.81% knocks $21 off the average monthly repayment on a $350,000 mortgage over 25 years.