WEEKLY BANKING NEWS
22 June 2009 - $2,500 goes up in smoke
Source: Herald Sun
Smokers spend $2,500 and 17 days per year smoking says a new research from Pfizer. Most smokers cut back on entertainment, clothing, eating out and clothing expenses to maintain their habit.
Smokers are being ripped off says Dr Peter Holmes because the average cigarette costs just a few cents to make but is sold for as much as 90 cents. Quitting smoking is a great way to deal with economic hard times because it puts more after tax income in your pocket says Holmes.
Smokers can calculate the impact on their time and finances by visiting www.outsmartcigarettes.com.au.
22 June 2009 - Think your debt is under control?
Source: Herald Sun
While average credit card balances are falling as repayments go up, consumer advocates are criticising banks for ramping up their card marketing.
"Lenders are doing as much as they can to boost people's potential credit card debts," says Nicole Rich from the Consumer Action Law Centre.
"As soon as we think we are getting things under control, along comes that letter, or incentive or reward points in a constant stream of marketing material to get us to increase our debt again."
One in three Australians believe they will face serious financial difficulties and are concerned about their job security. These fears are leading to households paying down debt and boosting their savings.
Research from the Melbourne Institute indicates that improved savings rates have improved the average household financial position in the June quarter.
22 June 2009 - Anger grows as big banks take over
Source: The Australian
Australia's smaller banks and non-bank lenders are demanding the government scrap the guarantee over bank borrowing and replicate the UK and Canadian alternative which is a government issued AAA rated mortgage bond.
Canada's banking system was recently judged by the world economic forum to be the world’s safest and was advocated by the G20 group of industrialised nations as a model for other countries to follow.
There is growing anger in the finance industry at the growing dominance of the big four Australian banks who have increased their market share significantly since the onset of the global financial crisis.
The Reserve Bank last week announced that the major bank's net interest margins had bounced back to levels not seen since before the financial crisis.
22 June 2009 - Bank rip-off priced at $1,500/year.
Source: Sunday Herald Sun
The major banks continue to dominate lending and banking despite being undercut by more than sixty credit unions and building societies. Infochoice says none of the ten cheapest variable rate mortgages are offered by a big bank.
In total Australians are throwing away $2.7 billion dollars by not choosing the cheapest mortgage, loan and deposit account deals in the marketplace.
Chief executive of Infochoice, Shaun Cornelius said it was difficult to see why people continue to pay over the odds with a major bank when such excellent alternatives abound. Borrowers could save $1,500 per year or about 0.5 per cent on standard variable mortgage by choosing a credit union or building society instead of a big bank.
Louise Petschler, chief executive of Abacus, the umbrella group representing credit unions and building societies said many people didn't realise that the government bank guarantee also applied to mutual financial institutions.
22 June 2009 - Lenders commit to hardship package
Source: The Daily Telegraph
One hundred and forty four banks, credit unions and building societies have signed up to the federal government's hardship principles, which commit them to assist customers who are having difficulty paying off their debt.
Under the protocol lenders are committed to a range of solutions for people in financial stress, including reducing the amount of repayments, postponing repayments for up to 12 months, interest only breaks and fee waivers.
The Australian Bankers Association said up to 80 per cent of home repossessions were by non-bank lenders, who should also be required to sign up to the government agreement.
22 June 2009 - Melbourne, Adelaide auctions do well
Source: Australian Property Monitors
The auction clearance rate in Sydney fell back slightly over the weekend of the 20-21 June to about 67 per cent from 69 per cent the week before. There were 270 auctions in Sydney on the weekend, down from 353 last week and 300 on the same weekend last year.
Melbourne auctions continued to do well with a clearance rate over the weekend of almost 75 per cent, well up on the same weekend last year when the clearance rate was 56 per cent. 498 residential properties were put up for auction in Melbourne on Saturday, slightly down from last week when 512 properties were auctioned.
In Adelaide, 62 per cent of 24 properties were sold at auction on Saturday, up from 41 per cent of 22 properties last week.
In Brisbane 46 per cent of 44 properties were reported sold at auction this weekend.
22 June 2009 - NSW extends first home grants
Source: Sun Herald
First home buyers in NSW will have the boosted federal government first home buyer's grant extended for an extra six months. The NSW government has also announced, in last week's state budget, that stamp duty on newly built homes worth less than $600,000 will be cut by 50 per cent.
Some experts warn that there is a danger that the state and federal government incentives for the housing industry could create a housing price 'bubble' at the lower end of the property market which will burst when overextended mortgagees can no longer afford their mortgages.
Some first home buyers are buying houses for $60,000 more than they were worth just 12 months ago in order to get the $14,000 in federal government grants.
22 June 2009 - Victorian property prices continue to rise
Source: Herald Sun
The Melbourne median property price rose 3.1 per cent to $388,000 in the last year according to figures released by the state government's valuer general.
In regional Victoria the median property price rose 1.7 per cent in 2008. In 2007, property prices rose by more than 8 per cent according to the valuer general.
The average price of units was up from $332,000 to $346,000. The median price for vacant land was up from $143,800 to $150,000.
Properties on the Mornington Peninsula performed the best with the median price in St Andrews beach rising 55 per cent to $620,000 and the median price in Portsea rising 47 per cent to $1.4 million.
19 June 2009 - Aussies pay off the card
Source: The Age
The average credit card balance went down in April for the first time in at least 14 years.
Data released yesterday by the Reserve Bank showed that on average, Australian owed $3,080 on their credit cards, down $37 on the figures from a year earlier.
Less people are using cash advances from their credit cards. Only one in six obtained cash from their credit card in April, down from one in five.
19 June 2009 - Back to our old ATM habits
Source: The Sheet
Users of automatic teller machines are already starting to drift back to old habits after only the second month of better publicised and slightly changed pricing.
Analysis by MWE Consulting of the monthly payments data from the RBA shows that following the introduction in the first week of March of the direct disclosure of fees for use of other ATMs, the proportion of traffic at own ATMs increased quite sharply, moving from 54.2 per cent in February 2009 to 60.0 per cent in March.
The level dropped back slightly in April to 58.6 per cent, in line with the expectations of a number of analysts who expect a short term change in behaviour, followed by a return to the previous pattern.
19 June 2009 - Banks do have extra costs says RBA
Source: Herald Sun
The Reserve Bank of Australia says banks have not been unreasonably raising interest rates on mortgage borrowers. The RBA Bulletin for April, released yesterday, concludes that the major banks "have cut variable housing loan rates more than the fall in their cost of funds."
The central bank confirms that the banks are correct with their statements that they have been facing increased funding costs. "The recent financial market turbulence has increased banks' funding costs relative to the cash rate" said the RBA.
Last week the prime minister and the treasurer criticised Commonwealth Bank for raising interest rates on its standard variable mortgage by 0.10 per cent to 5.74 per cet.
19 June 2009 - Non-bank lenders need support to boost competition
Source: The Australian Financial Review
The federal government is considering extra support for non bank lenders who have largely been shut out of the home lending market by the major banks.
Many non bank lenders have found funding for their lending programs difficult to source since the onset of the global financial crisis.
Banks now have more than 92 per cent of the mortgage market, up from 79 per cent two years ago.
The federal government is now considering expanding its $8 billion mortgage backed securities buying program to $30 billion and offering an AAA government guarantee on mortgage backed securities.
Data from the Reserve Bank indicates that bank margins are beginning to widen, just as non-banks have largely been shut out of the market.
The prime minster Kevin Rudd hinted at further reforms to promote competition in banking in Parliament on Tuesday.
19 June 2009 - RBA says banks are setting rates
Source: The Age
The Reserve Bank of Australia says it is losing the ability to set interest rates. An RBA report issued yesterday says rising funding costs has eroded the significance of the official interest rate. The report implies that banks may continue to raise or adjust their interest rates outside of moves to change rates by the Reserve Bank of Australia.
19 June 2009 - RBA tells Banks: no rate rises
Source: The Australian Financial Review
Banks will not have to raise rates again, outside of Reserve Bank changes to the official cash rate, says the Reserve Bank. The RBA is now expected to leave the official cash rate set at 3.0 per cent for some time.
Interest rate analysts said the RBA would be very concerned if banks raised rates independently. The RBA said that bank margins had contracted since the start of the global financial crisis but had recovered in recent months to pre-crisis levels.
Banks were expected to move rates up by up to 0.4 per cent following the Commonwealth's rate hike of 0.10 per cent on standard variable mortgages last week. However other banks have not yet adjusted their standard variable rates but have moved some of their fixed rate products up by about 0.5 per cent.
19 June 2009 - Debit growing, credit still king
Source: The Australian Financial Review
Australians are continuing to choose debit cards over credit. The rate of growth of debit transactions has continued over the last year, while the number of credit transactions as a proportion of the total card spend continued to fall.
35.3 per cent of all card transactions were debit card transactions in April 2009, up from 32.9 per cent a year earlier. 52.5 per cent of transactions were made via MasterCard or Visa, down from 54.6 per cent a year ago. The remainder were made via a charge card.
The number of credit and charge card accounts is still growing, but a much slower rate than a year ago.
18 June 2009 - Banks need more savings
Source: The Australian Financial Review
Australians need to save more in order to ensure the ongoing strength of our big banks say bank chiefs.
Cameron Clyne, chief executive of National Australia Bank says "Domestic demand for credit significantly exceeds our capacity to save." Clyne says Australians are reliant on the willingness of others to lend to us.
Despite providing easy credit over the last ten years, Australia's banks have operated with the lowest deposit base of any comparable country in the world.
The reliance of Australian banks on international wholesale funding markets was a structural weakness that ultimately threatened the bank's AA credit ratings said experts.
Banks have increased the proportion of their funding sourced from retail deposits from 50 per cent to 60 per cent but further growth opportunities are limited.
Meanwhile, deposits held by credit unions increased by thirteen per cent in the past year accor ding to the banking regulator APRA. Term deposits grew by $4.3 billion. Australians now have close to one trillion dollars in savings.
18 June 2009 - Banks to tighten up lending
Source: The Australian Financial Review
Banks will need to raise interest rates or tighten up on loan approvals in the next year because of ongoing shortage of funding say bank chiefs.
Banks are facing the prospect of raising $600 billion in the next four years, including $200 billion in the next 12 months.
NAB chief executive Cameron Clyne says if Australians can't find ways to boost their savings pool, banks would have to constrain lending.
18 June 2009 - Borrowers need to look beyond banks
Source: Herald Sun
More than ninety per cent of home loan borrowers choose one of the big banks for their home loan, despite the fact that they do not offer the cheapest loan deals. More than 60 other lenders, including many credit unions, undercut the big banks.
The average standard variable home loan rate on offer from a big bank is now more than 0.5 per cent higher than their nearest non-bank rival says Infochoice chief executive Shaun Cornelius.
The difference in rates between a big bank and a non-bank rival could add three years of repayments to the average mortgage said Cornelius.
18 June 2009 - Commonwealth admits to Storm mistakes
Source: Herald Sun
Commonwealth Bank chief executive Ralph Norris has broken his long running silence on the collapse of Townsville based advisor group Storm Financial. There were 'mistakes' and 'shortcomings' were made in giving margin loans to 2,500 Storm clients.
Norris suspended all loan repayments until August 31 and softened the settlement deals offered to Storm victims. "Our customers can be assured that where we have done wrong, we will put it right," said Norris.
More than 14,000 Storm clients have suffered share market losses. More than 3,000 clients have had their life savings wiped out or lost their homes.
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