Doesn’t anyone notice this. I feel like I’m taking crazy pills.

Last week, 3 of the 4 major Australian banks increased their mortgage interest rates.

The media and the political class, with their standard deep analysis and understanding of the business models and funding of banks did the predictable thing.  They criticised the 3 that increased rates (ANZ, CBA, WBC) and praised the 1 that made no change (NAB).

The whole “out of cycle” interest rate change blah blah was brought out, as if domestic savings are the principle source of funds for the banks.

Did anyone bother to actually look at what the rates were or was the movement just the story.  The answer is no obviously because notwithstanding the increases, the standard variable rate for ANZ (5.20%) and CBA (5.22%) are still less than NAB (5.24%) and the Westpac rate (5.24%) is now the same as NAB .

But actually looking at the details requires some level of journalistic and analytical sophistication.

Spartacus is not suggesting that these are appropriate rates or competitive rates, but NAB should not be complimented for having the equal highest standard variable mortgage rate of the big 4.

Spartacus hopes that a similar level of sophistication would be applied to the analysis of government expenditures (ie looking at the total spent and not the incemental variance), but somehow doubts that that will happen.  Spartacus feels like he is taking crazy pills.

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21 Responses to Doesn’t anyone notice this. I feel like I’m taking crazy pills.

  1. Siltstone

    But actually looking at the details requires some level of journalistic and analytical sophistication.

    “analytical sophistication”, from journalists?

  2. .

    The whole “out of cycle” interest rate change blah blah was brought out, as if domestic savings are the principle source of funds for the banks.

    Did they not notice our very high levels of public and private debt?

    It is part of the cycle. The banks are active participants in the cycle; as we all are.

  3. Chris M

    Indeed you are. Always referring to yourself in the third person was a hint. We are not amused…

  4. Davo

    Yep, having a brain and daring to use it does seem to be the new crazy

  5. Rafe Champion

    Stay strong Spartacus!
    But if necessary try a Bex and a good lie down.

  6. Something doesn’t add up.
    My bank slashed my interest rate this week.
    It seemed odd (i.e. “out of cycle”) when they first raised the prospect a few weeks ago.

  7. tombell

    is the principal the principle?

  8. Mark A

    Chris M
    #2819445, posted on September 18, 2018 at 9:44 pm

    Indeed you are. Always referring to yourself in the third person was a hint. We are not amused…

    It’s a supercilious affectation, on par with bandana man’s silly kerchief, but at least we are spared from looking at him.

  9. Chris M

    Yes, should add not that there is anything wrong with identifying as a crazy Spartacus of course. After all it’s the era of identifying as any body or any thing, inanimate or otherwise.

    On topic his point is, of course, quite valid. Expecting anything sensible from the media not so much. Banks are highly leveraged elaborate stacks of cards so there may be some worried comments circulating in the back rooms. Not to mind, the taxpayers are always here to help.

  10. Bruce of Newcastle

    I’m amused that government monstering of the banks, and increasing their costs of doing business, has caused them to put up interest rates.

    Who knew that could possibly happen?

  11. I’m amused that government monstering of the banks, and increasing their costs of doing business, has caused them to put up interest rates.

    Can’t agree here BoN. Firstly, mismanaging existing compliance obligations and then paying a fine is not “government monstering”. Secondly however, the greater factor in increased interest rates is the increased price of money, especially money coming from the US where tax cut and deregulation increased competition for capital – meaning Aussie banks need to pay more. But who knew that business deregulation and tax cuts would improve an economy.

    And the issue is not increased interest rates. It is the spread between what the banks borrow and lend at.

  12. I’m glad mortgage interest rates don’t bother us anymore. I remember buying our first home when interest rates were creeping up to 17%. Following that sort of interest rate, we always made sure that we could service an interest rate that was way higher than the current rate and kept well in front of payments.

  13. Bruce of Newcastle

    And the issue is not increased interest rates.

    I doubt that mortgage borrowers and small businesses would agree Spartacus.

  14. .

    I’m glad mortgage interest rates don’t bother us anymore.

    They’re still an issue.

    In 2011-2013, in real terms, mortgage rates were higher in real terms compared to anytime in the 1980s or 1990s.

  15. They’re still an issue.

    Not if you no longer have a mortgage. But many do and with house prices what they are, I certainly understand they are an issue.

  16. I doubt that mortgage borrowers and small businesses would agree Spartacus.

    Perhaps. But I suspect savers, investors and others on fixed incomes would.

  17. Bruce of Newcastle

    Let them eat steak eh Spartacus?
    I’m almost sure that was the phrase.

    Venezuela president dines on ‘Salt Bae’ steaks while his nation starves

    Always government loves to blame bankers for their own bad policies.
    At least they do so until the guillotine blade finally drops.

  18. Hasbeen

    Journalists are the people who got top marks, & lots of praise for their essays. They are also the ones who failed, or barely passed math & physics/science. Does anyone expect anything but twaddle from them.

    Surely if the government wanted to chastise the banks they would find another way to pay welfare & pensions, than putting it into bank accounts to give the banks a grab for some of it.

  19. Speedbox

    It is the perennial debate about who wins and looses when rates go up. Obviously, those with adjustable rate debt suffer, whilst those who use interest accrued as income will benefit.

    During the most recent round of increases, I was curious at the restraint displayed by the banks. The increases were modest and restrained. Was it because of the Royal Commission spotlight? Government pressure? Desperate self-interest by the banks?

    Regardless, global inter-bank borrowing costs have risen and pressure continues to mount. Our seemingly insatiable thirst for debt cannot be solely funded from within Australia and Australian banks compete in the international markets for funding.

    It is now estimated that hundreds of thousands of Aussie households are ‘at the point’ of mortgage stress. In other words, their capacity to absorb interest rate increases is almost extinguished. But, how can that be? Surely, their finances can’t be sooo precarious that a tiny 0.015% increase sent them to the edge of the financial abyss – except it can because the banks happily funded sub-prime borrowers and get-rich-quick ‘investors’, and the bubble is poised to burst.

    You may recall that it was mid 2016 and then again in early 2017 when APRA pushed the banks to tighten the lending screws but by then, it was too late. The drunken orgy of careless lending did slow, particularly to the willfully lying sub-prime borrowers and grossly optimistic ‘investors’, but the effect on the real estate market takes time and only now are we seeing a cooling.

    Meanwhile, overseas, funding (inter-bank borrowing) costs have been increasing. The market expects the US Federal Reserve to increase rates 5-6 times between now and the end of 2019. The US economy is doing very well and money is flooding to it – diminishing that available for Australian banks, at the current rates, so the banks must ‘up’ their competition.

    The Australian banks (and Government) are in no position to soften a financial blow. Any significant financial shock that impacts global financial markets and consequently inter-banking rates will have a cataclysmic impact on Australian households.

  20. JohnA

    It is well past time for the SFR (similar to SF Liberals) to change its stance on interest rates.

    One of its prime objectives is to defend the Australian dollar, and raising the level of interest rates would be most effective in getting us back to the appropriate range of approx 0.75-0.80 against the USD.

    It might also have the effect of dampening housing demand and taking pressure off house prices while encouraging investment in better-yielding business ventures, boosting superannuation returns and at the same time sheeting home to the Treasurer and PM the cost of budgetary red ink.

  21. Stimpson J. Cat

    This article is Fake News.

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