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)

Commercial finance commitments improve

Total personal finance commitments fell 0.7 per cent in July $6.833 billion, down from $6.882 billion in June, according to data released by the Australian Bureau of Statistics. This is for stuff like personal loans, personal credit cards and store finance. No doubt we'll soon hear from Gerry Harvey about the need for further government stimulous if this trend is maintained.

However, on a more positive note for the economy, total commercial finance rose 8.2 per cent in July to $29.785 billion, up from $27.537 billion in June. Lease finance was up 3.2 per cent $386 million, compared with $374 million the month before, and housing finance for owner occupation rose 2.3 per cent to $13.761 billion in July, up from $13.458 billion in June.

(Source: Business Spectator)

Australia - we're a nation of givers

According to a report by the British-based Charities Aid Foundation, AUSTRALIA is a nation of givers, tying equal first with our cousins across the Tasman, New Zealand as the countries whose citizens are most willing to donate their time and money to charity.

The report found 70 per cent of Australians had given money to a charity, and 38 per cent had donated their time, in the month before they were surveyed. Almost two-thirds had given assistance to a stranger.

(source: Sydney Morning Herald)

Home buyers returning to market

HOME buyers, lured by a steady interest rate outlook and cooling house-price growth, have been returning to the market, with demand for home loans picking up. At the same time, there are
emerging signs that some banks are again letting home owners borrow more, with some lenders starting to relax recent tight standards with the reintroduction of higher LVR loans.

Demand for home loans eased earlier this year, pressured by three consecutive monthly interest rate rises and ballooning prices along Australia's east coast. In May, housing credit was running at a three-month annualised growth rate of 6 per cent; however, this had since increased to 8.2 per cent.

Yesterday the Australian Bureau of Statistics released figures showing housing finance commitments rose 1.7 per cent in July, seasonally adjusted. The result easily beat the market forecast of a 1 per cent rise.

(Source: Sydney Morning Herald)

Money makes you think you're happy

Does money make you happy?

It's an age-old question, and two American researchers think they have the answer: it does ... and it also doesn't.

More money may bring a life you think is better, but on an everyday basis you won't actually be any happier for it, according to Daniel Kahneman and Angus Deaton from Princeton University, who authored the study in the Proceedings of the National Academy of Sciences,

Previous studies have found the relationship between wealth and well-being to be fairly weak

Two types of happiness

Kahneman and Deaton, however, made a subtle but important distinction between two types of well-being: life evaluation, which is a person's thoughts about their life over a long period, and emotional well-being, which is a measure of their daily emotions, such as joy, affection, anger and anxiety... read more

(source: Cosmos: The science of everything)