“Really? Is that the community expectation?
Is that what we expect of banks who are trying to improve their image?
He denied, denied and denied.
If you’ve made some mistakes – fess up before their found out” (Listen Here)
Newsletter – September 7 2018
Last week I told you shots were fired and it wouldn’t be the last –
Thankfully…I got that right…Not that it was such a brave call, it was inevitable.
After Westpac announced it was increasing its variable home loan interest rates for investors and home owners by 0.14 per cent to 5.38 per cent – despite the Reserve Bank of Australia keeping the official interest rate on hold for the 25th months straight – others were expected to follow.
And they most certainly did.
The ANZ pulled the trigger first, raising standard variable rates by 16 basis points. Twenty minutes later, the Commonwealth Bank of Australia followed, lifting rates by 15 basis points – 0.15 per cent.
Now, if you’re a customer of the CBA, that’s going to add around $47 a month to repayments on a 30 year, $500,000 mortgage or just under $560 a year.
If you’re with NAB – that’s $50 a month, and an extra $560 a year out of your pocket.
At the time Westpac said the reason for the rate rise had nothing to do with damaging revelations coming out of the Royal Commission.
Instead, it’s due to wholesale funding – basically, its because interest rates are rising in places such as America where the banks borrow a lot of money from.
Banks say they can no longer absorb those costs, forcing them to hike their rates. Local money is moving to the US, chasing higher rates, so that puts pressure on rates here as well.
Now, there was also talk that Westpac was able to be the first to pull the trigger last week as its reputation hasn’t been as damaged compared to the likes of the CBA, NAB and the AMP.
I spoke with the CEO of the ANZ, Shayne Elliot, after the lifted their rates – he said ANZ’s decision to increase the price of mortgages was “inevitable”.
“We’ve got a business to run and we’ve got to take in a lot of factors when we make these decisions.
“We want to have the best product out there in the market for our customers.
“On the other hand, I’ve got to look at my cost and the reality is that the cost of funding the bank has gone up pretty substantially over the last six months.” (Listen here)
If there is one thing we have learnt from the Royal Commission, its banks have a terrible habit of putting shareholders before their customers.
When I put this claim towards Mr Elliot, he says they have to “balance” both sides.
“It’s not about who comes first, who’s second,”
“It’s about getting that balance right.” (Listen here)
One bank who did not get that balance right is the National Australia Bank Wealth Management subsidiaries who was hit with Federal Court Proceeding by the corporate watchdog ASIC over charging fees-for-no-service.
This is due to the revelations out of the Royal Commission – the first bank to be taken to court over the industry-wide fee for no service scandal, which has come to light due to the Royal Commission – the extent of which could exceed $1 billion.
Now, I have previously told you about how the boss of the NAB – Andrew Thorburn – profusely apologised for revelations in the Royal Commission, and how it did not wash with me.
Mainly because the National Australia Bank had fought tooth and nail not to have that information revealed, trying to cover up what had been taking place inside the bank.
ASIC is suing two of NAB’s wealth management entities for charging hundreds of thousands of clients up to $100 million in fees for services that were not provided.
ASIC is pursuing civil penalties against NAB’s current and former super trustee – NULIS Nominees and MLC Nominees – for allegedly misleading customers of MLC MasterKey Super products.
ASIC alleges approximately $33 million in plan service fees were deducted from the accounts of 220,000 members of MLC MasterKey Business and MLC MasterKey Personal Super when those accounts were not linked to a plan service provider.
ASIC also allege a further $67 million in such fees was deducted from 300,000 members of MLC MasterKey Personal Super, even though the customers were not expected to receive any service at all.
Now, this remains before the court so I will definitely keep you up to date as these proceeding go ahead.
The other news out this week was the state of Australia’s economy and it turns out, over the past twelve months, it has grown at its fastest pace in six years, since the mining boom.
3.4 per cent of annualised growth and the economy in the June quarter grew by 0.9 per cent – fantastic figures and above expectations.
Now, this makes me wonder – don’t know about you – but we’ve just had a leadership challenge with Prime Minister tossed overboard.
Now you might argue a whole lot of things about the politics, and Prime Minister and the whole way the party room was set up – but one thing you can’t deny…you normally don’t throw a Prime Minister out, or a political party, unless things are going bad in the economy.
But they aren’t. The economy is going brilliant right now.
You – personally – might things are bad in the economy with rising cost of livings and dwindling savings, but the National Accounts for the June quarter show Australian households were actually a big contributor to this increase in the economy – as was the government.
I spoke to the new Treasurer Josh Frydenberg who says “all Australians should be delighted”.
I can also tell you, the government is delighted by those results – it is the largest of any G7 nation, well above the OECD average of 2.5 per cent and it was above expectations
But can this growth continue?
The Treasurer says “I do believe that we can continue the momentum, that this reflects the fundamentals of the Australian economy.
“What was so important with these numbers was the growth was broadly based. We saw increases in household consumption, we saw increases in dwelling investment.”(Listen here)
I suppose we will have to wait until December with the release of the Mid-Year Economic and Fiscal Outlook to see if the new Treasurer was correct.
But one thing the National Accounts did show was while the economy is flying, the amount households are saving is the lowest in 11 years – just one percent of their income.
In the absence of wage rises, families are maintaining their lifestyles, paying their mortgages and power bills, but putting less in their piggy banks.
And this is not good. With the banks raising interest rates – causing you to repay more of your loan quickly – this is a hit that you’re pocket cannot take.
For all this and more, visit www.moneyaction.com.au
Westpac hit with fine for lax lending laws – Watch Here
Money News –
Why has ANZ raised interest rates? – Listen Here
Are we being sold “Fake Honey”? – Listen Here
Interviews during the week
Interviewed –Cameron Kusher, Senior Researcher, Corelogic RP Data–titled –Will property prices keep falling?
Interviewed –Roger Wilkins, Deputy Director, Melbourne Institute–titled –Why are people working later?
Interviewed –Chris Merritt, Legal Affairs Editor, The Australian–titled –A sting in the fake honey story