Interst (ing) rates – that you can no longer bank on

Interst (ing) rates – that you can no longer bank on

One has to simply hand it to our politicians ! If they don’t know the correct answer they just make one up. With the major banks raising interest rates, Federal Treasure “Wayne’s World” Swan responded with the suggestion, that if customers were unhappy they should simply change lenders. Unfortunately for “Wayne’s World” it is not that simple as the banks are actually well justified to keep raising their rates as I found out when I looked a little deeper, he however obviously has little idea as to the reasons why?

I found this blog on the topic and here is what Matthew Auger had to offer on this delicate subject. “To understand why the banks have jacked up rates unilaterally, compare the RBA rates to the three month and one year Bank Bill Swap Rates (BBSRs). On the 1st of July 2007, the RBA’s Overnight Cash rate (AKA “Official Interest Rates” to the punters) was 6.25%, the three month BBSR was 6.64% and the one year BBSR was 6.82%. On the 8th of August the RBA raised rates to 6.5%, the three month BBSR was 6.64% and the one year BBSR was 6.94%. By November when the credit crunch was in full swing, the RBA raised rates to 6.75%, the three month BBSR was 7.11% and the one year BBSR was 7.52%. As you can see the gaps were widening and hence the banks started doing unilateral rises in January. At the February rate rise to 7.00%, the three month BBSR was 7.42% and the one year BBSR was 7.68%. Things were getting nasty in March when the RBA jacked up rates to 7.25%. The three month BBSR was 7.97% and the one year BBSR was 8.16% (nearly a full 1% above the RBA rate). Since then the RBA hasn’t changed rates but the three month BBSR has peaked at 8.11% on the on the 11th of March and is currently 7.80% and the one year BBSR has peaked at 8.47% on the 11th June and is currently 8.05%. As you can see, even today BBSR’s are over half a percent above the RBA’s rates hence why the banks have been unilaterally raising rates by a similar level. To get an idea of whether the banks will do any more unilateral rate raises keep an eye on the BBSR’s, they are what matter.”

Fear not! “Wayne’s World” Federal Government “bank switching package” will be ready by November for unhappy bank customers. Maybe Wayne Swan would be better served if someone explained to him what BBSR stands for when it appears in the business section of the newspapers.

Had to laugh at The Sunday Telegraph (Belly Laugh) article last Sunday “Housing market worst in a century.” Which kept contradicting itself.“Property values in Sydney and across Australia have plummeted with more than 50 per cent of homes across the nation losing value in June.” The article posted the Best Suburbs and Worst Suburbs.

To put the top-end markets into perspective , they continue to perform well despite the “Housing market worst in a century” headline. Here are the top apartment and house sales for 2008 that appeared in Saturday Domain by Jonathan Chancellor.

Here are the Worst Suburbs where the results are about as scary as a Wayne Swan economy outlook speech.

In last week’s edition I predicted that property prices through to June 30, 2009 would experience 5 to 10 per cent swings plus or minus and we are obviously still on the money. More importantly, Mosman is sitting on a +6.17 per cent three month swing which adds to the intrigue of the forthcoming Spring/Summer markets.

In preparation, I am away for the next two editions so our very own Stephen Patrick and Richard Simeon will be presenting “Virtual Realty News”. Now that will make interesting reading. Cheers ^__^

2 Responses to “Interst (ing) rates – that you can no longer bank on”

  • jack gallacher says:

    you have to be kidding. A real estate agent criticising the goverment on its marketing spin. Please!

  • Gordon says:

    You seem to be overlooking a couple of things, jack g.

    There are some pretty strict laws about what agents can say and do, whereas our beloved pollies have always ensured that they are above the law in more ways than one.

    And the pollies are using our money to spin and deceive us about how they are wasting it, which we have to wear for three or four years at a time. By contrast, we can choose to deal or not deal with any agent as we wish.

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