Does Kevin Rudd need to turn the heat up on Australian banks to ease the mortgage meltdown?

The big four Australian banks have had it sweet for so long, but have copped a serve from Prime Minister Kevin Rudd in recent weeks, as struggling mortgagor homeowners haven’t been getting all the interest rate cuts from the RBA passed on to them.
Obviously the banks are used to having their names dragged through the mud as its becoming an Australian pastime to bag the banks behaviour by Jill and Joe Public. So the Prime Minister has good right to feel that joining in with a quick flurry of words on behalf of Mr and Ms Mortgage can’t harm him in the polls. But it is not going to change the Banks’ motives or behaviour. After all, they have to work in the best interest of their Shareholders, and on that basis you would have to say they are going a great job, if you compare their performance and results against banks in the US or the UK.
But the big four Banks have a privileged position, and banking is a mainstream public service as well as a business, so Mr Rudd needs to deliver effective competition within the Australian Mortgage Industry to create a level playing field. In my view this will mean legislating for an effective mortgage and credit card marketplace, and one with real competition.
Regional Banks and building societies and credit unions, as well as non bank securitised mortgage lenders need some legislation that might be called positive discrimination to level that playing field.
The big four Australian banks [CBA, NAB, Westpac and ANZ] are, obscenely profitable. For example and raked in $9.5 billion in profit in just six months. And this is while there is a global recession? Australia’s banks are among the world’s most stable and profitable and have been for some time.
The Finance Sector Union (FSU)has urged that banks make their lending practises more responsible by suggesting that Australians’ ever-increasing credit card debt is unsustainable; and that linking salaries to peddling high-debt products like mortgages does not serve customers well, especially when it’s to buy shonky and highly geared investment products such as the two tier real estate market in Queensland in the 1990’s and the recent Storm Financial collapse.
Its time for action Mr Rudd, not another verbal bashing. A viable mortgage alternative to the banks is required by all homeowners and home buyers. The current system means that second tier lenders get the customers that the big four don’t want, and this will only increase the gap in profitability between Australia’s big and small mortgage lenders.
Rick Adlam is Mr Mortgage

Mortgage lenders and home buiders rejoice as Australia avoids the world recession

Australia appears to have escaped the recession the World recovers

Based on record retail sales, lifting new home sales and recovery in our trading partners, the Reserve Bank of Australia deciding to leave interest rates unchanged at 3 per cent, when the board met today at its June Meeting.

The Rudd government must be dancing in the corridors of Parliament house. Expect them to make the Liberal opposition pay now for its criticism of the stimulus package handouts, and first home owners Grant boost, which saved the building industry from decline and job losses.

The Retail industry must also be thankful as the stimulus reaped them a record April shopping sales.

The decision to keep interest rates at its 45-year low is good news for the housing industry, home buyers and mortgage lenders because there is money to throw at any weakness the RBA board sees later in the year.

In a statement released this afternoon, Reserve Bank governor Glenn Stevens said there was evidence emerging the global economy is stabilising.

“The turnaround is clearest in China and some other emerging countries,” he said.

“Recovery in the major countries is likely to take longer to begin and be slower when it does occur.”

Mr Stevens said although the effect of low mortgage rates was yet to be seen, future rate cuts were possible if the economy continued to deteriorate.

“The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed.”

The Reserve Bank cut the official cash rate by 25 basis points in April ending 425 basis points worth of reductions since September.

The central bank has since indicated it is in no rush to lower rates further as it assesses the impact of its easier monetary policy stance and the Federal Government’s stimulus packages.

The stimulus packages have worked their magic and have lifted the retail industry, with figures out yesterday showing consumers spending a record $19.4 billion shopping in April.
Mr Mortgagesays that this is good new for homeowners, home buyers and the residential building building industry.

HIA gives thumbs up to extending First Home Owners Grant Boost

The Housing industry of Australia [HIA] is Australia’s largest residential building association gave its approval to the pro-active decision of the Federal Government to triple the First Home Owners Grant (FHOG), saying at the time that the measure was necessary to save jobs in the residential construction and manufacturing industry.

They they are applauding the Governments decision to extend the Grant boost til the end of this year.

HIA Managing Director, Dr Ron Silberberg said that there had been widespread evidence of job shedding by major builders as well as plant closures and retrenchments by building product manufacturers, which were eroding the industry’s supply capacity.

Thanks to the tripling of FHOG for new housing, major builders have told HIA that they will now curtail further job retrenchments,” he said.

Building product manufacturers will be looking to re-open plant and move from a 4-day to 5-day operating week.” The increase in FHOG has invigorated confidence in the industry and lifted the spirits of many aspiring first home buyers looking at purchasing a new dwelling. Already, builders are reporting an increase in inquiry levels.

“The tripling of FHOG appropriately is targeted at increasing the supply of new housing and will complement other major initiatives to increase the availability of lower-cost new housing. By moving quickly to stabilise the industry’s supply capacity, the initiative will help to ensure the industry is better placed to handle a sustained upswing in general buyer activity down the track, said Ron Silberberg.

A yawning deposit gap has prevented many first home buyers from attaining homeownership. This measure will assist many who due to a lack of deposit and previous increases in interest rates were unable to get into the housing market.

It is ironic that just two weeks ago, some commentators were predicting falls in house prices of 40 to 50 per cent. Following the increase in FHOG some are predicting a house price boom. Neither proposition is credible nor based on empirical research.

Even if the additional FHOG was capitalized fully into house prices (assuming no supply response), the impact on a typical first home of $400,000 would be less than 4 per cent, hardly the impetus for a house price boom. “It is difficult to see how a nine-month stimulus from the extra FHOG could lead to a break-out of house price inflation.

The new FHOG will help to sustain employment in the residential construction industry and provide welcome assistance for many who have been shut out of the housing market,” said Ron Silberberg.