Bank Bashing
First things first, the Commonwealth Bank is certainly big enough to look after itself, but the ‘…Australians will rightly be furious…’ comments from Federal Treasurer Wayne Swan last week were perhaps a touch unwarranted.
A ten basis point increase in CBA’s variable mortgage rate to 5.74 per cent prompted the Treasurers outburst, when Commonwealth had previously offered the cheapest variable rate of the big four.
Swan’s reaction points to the creeping incidence of tabloid-politics or knee-jerk policy that constituents seem to be demanding, perhaps a phenomenon driven by today’s numerous 30 minute reality TV shows that see decisions made within the allocated time slot and even taking into account the ad breaks.
Anyhow back to the matter of CBA, National Australia Bank is already charging 5.74 per cent, and the ANZ and Westpac already demand a seven basis point premium on this rate at 5.81 per cent.
Borrowers though continue to identify Commonwealth Bank as their mortgage lender of choice, with the bank’s mortgage book increasing $4.3 billion in April 2009, more than half of the $8.4 billion net total for all banks operating in Australia, CoreData figures in its latest Australian Mortgage Report show.
Bank bashing by the Treasurer needs to stop, replacing the outbursts with interest rate repayment education for the tens of thousands of first time buyers encouraged onto the shaky housing ladder through the increased first home buyer government incentives.
Only 4.2 per cent of new mortgages in April 2009 were fixed according to the Australian Mortgage Report, even as official cash rates sit at near 50 years lows.
The average big bank three year fixed mortgage rate has already increased 75 points since the beginning of April 2009, with the average four year fixed up 50 points and the average five year spiking 65 points.
The fixed rate increase by the big banks is one indicator interest rates may have already bottomed, with another being that money markets are no longer pricing in further cuts, with the 90 day bank bills pricing in a 25 point increase by September 2009, with the possibility of a further 25 point increase by December.
If the Reserve Bank increases official rates in the next 18 months, then it may well be Australians who are furious with Swan for encouraging them to borrow when interest rates were at unsustainable low levels, and not educate borrowers to fix mortgage commitments when they had the chance.
