Who really is sqeezing interest rate margins

Banks are threatening to raise interest rates by more than any official rise in the cash rate by the Reserve Bank of Australia. They further threaten that these additional rises might come about even if the RBA does not raise interest rates any time soon. They say this is necessary because funding costs are reducing their margins.

Question: If bank interest rate margins are really threatened by increased funding costs, why are banks offering generous discounts on home loans - in some cases up to 0.80 per cent?

Aussie reaches parity with Loonie

for the first time in six years, the Australian dollar was on equal footing with the Canadian dollar, widely referred to as the loonie because of the imprint of a loon on the dollar coin.


The Aussie was fractionally more valuable than the Canadian currency briefly overnight and this morning was fractionally lower. It is the first time the two currencies have been one-for-one since 2004.

The Australian dollar broke through the 97-US-cent mark yesterday afternoon and touched the 97.3 mark again in evening trade. This morning it was buying 96.88 US cents and about midday east-coast time it was buying 96.8 US cents after taking a drop on the news that building approvals were worse than had been expected.

The softer housing figures means there is now some doubt about the Reserve Bank's resolve to increase interest rates when its board meets next week.

(Source: Sydney Morning Herald)

Breakdown Shocker

When marriages and de facto relationships fail, the finances of the separated couples are almost always badly damaged. And particularly for older couples, rebuilding personal finances from failed relationships can be particularly difficult, especially for older separated couples.

A recent study, Divorce and the Wellbeing of Older Australians, published by the Australian Institute of Family Studies highlights a particularly shocking statistic: More than a quarter of the population age 55-84 have been divorced. The institute attributes such a large percentage to an extraordinarily high number of divorces in the late seventies, which is “compounded” by the rapid ageing of the Australian population.

The institute studied the probable impact of marital breakdown using information gathered by the Household Income and Labour Dynamics in Australia survey (HILDA).

“Divorce has a long-lasting negative impact on well being and the effects appear to persist later in life for men and women,” according to the study.

Apart from the social and medical effect of divorce, the study emphasises the financial fallout. The financial consequences, of course, are extremely difficult to measure. But just think that savings and possibly earning capabilities are cut in two – not necessarily in equal proportions.

And the sheer number of baby boomers on the eve of retirement or in retirement who have been divorced at least once in their lives is staggering.

It is often said that people should ideally enter retirement with mortgage-free homes and without debts – not to mention sufficient retirement savings. But that can be extremely hard for separated older couples, particularly those whose relationship failed later in their lives.

(Source: Article reproduced in full from Vanguard Investments)

Credit cards fatten their margins

Credit card companies in AUSTRALIA have increased the average rate on non introductory credit cards by 2.36 percentage points to 17.16 per cent over the period from December 2007 to July 2010. Within that same period, the Reserve Bank cash rate has fallen from 6.75 per cent to 4.5 per cent.

(Source: Ratecity)

Aussie dollar reaches new high

The Australian dollar reached a fresh two-year high against the U.S. dollar early Wednesday as strong retail sales and a banking report of more help from the U.S. Federal Reserve lifted the currency.The Aussie was further boosted in Asian trading after intervention by Japanese authorities to sell down the price of the Yen. Japan stepped into the currency market on Wednesday for the first time in six years, selling yen to stem a rise that is threatening its fragile economic recovery.

(source: Wall Street Journal; Business Spectator)