RBA slashes Rates by a full 1% - Page 6

4Vman · 09-11-2008, 02:59 PM

Quote:

Originally Posted by benoxr

Whilst I agree with that, does it really have to be at my expense?
For example, we have had 3 reductions in interest rates recently.
.5%, 1.0% and .75%
As a result of those first 2 drops, my Credit Union in its wisdom has reduced my mortgage rate a total of .25% and then on 1st Dec will drop it another .63%.
I want them to stay viable too but I dont want to have to pay for that viability out of my own pocket. In the end, if they can't be competitive I'll jump ship and bad luck if they went under..

Competition is healthy, but exactly who do you think should make the banks profitable/viable? Of coarse it should be the customers..

benoxr · 09-11-2008, 03:12 PM

Quote:

Of coarse it should be the customers..

I realise this, but information put out by the Govt for example incinuate that we should all be prepared to pay a bit more in mortgage rates (when though dont drop them the full amount) to help them stay viable throughout the forthcoming recession.
I can't see much point in me and my family losing our home just so the Credit Union can make more profit on top of their best year ever. But as you said, competition is healthy so I have been looking into giving them the flick even though that is a huge hassle in itself.

of course if all banks etc dont pass on the interest drops, we dont have much choice and thats not healthy competition

4Vman · 09-11-2008, 05:19 PM

Quote:

Originally Posted by benoxr

But as you said, competition is healthy so I have been looking into giving them the flick even though that is a huge hassle in itself.

of course if all banks etc dont pass on the interest drops, we dont have much choice and thats not healthy competition

Bingo! Shop around, get the best deal, the ones that drop a bit more than the others will get more business... if the Banks colude the ACCC will be all over it. I seriously doubt they will though. Yes, competition is healthy!

balthazarr · 09-11-2008, 06:01 PM

Quote:

Originally Posted by 4Vman

Bingo! Shop around, get the best deal, the ones that drop a bit more than the others will get more business... if the Banks colude the ACCC will be all over it. I seriously doubt they will though. Yes, competition is healthy!

It may technically not be collusion, but isn't it convenient that the big four happen to have the same rates, and they just happen to reduce their rates by the same amount - surely all four can't have the same overheads?

Be very glad that we still have the 'four pillars'... though I suspect that will change in future. There has been talk of the big four merging to create the big two... with all of this financial turmoil, they may be able to convince the government to let them do it.

Competition is healthy... but it's still way too costly and time consuming to switch mortgagees. I believe the government is working on a scheme to make it easier and cheaper - I guess we'll have to wait and see what the outcome is.

Mark351 · 09-11-2008, 08:00 PM

Hammer you're existing lender. If you're not getting 0.7% off the normal rate you're being screwed. Ring, ask for a payout and when they ask why, say because you're chasing a better rate.

Yellow_Festiva · 09-11-2008, 08:34 PM

Quote:

Originally Posted by Death351

Hammer you're existing lender. If you're not getting 0.7% off the normal rate you're being screwed. Ring, ask for a payout and when they ask why, say because you're chasing a better rate.

This would be a good idea, but the break costs may be a lot more than the saving you will gain.

Some folk on the radio last week were saying that they would be up for $12-18K to switch lenders. (GE seemed to be mentioned a lot in these discussions)

Hardly worth it to save perhaps $100 a month.

If you have a largish variable loan over around 3 or 4 years old than the breaking costs are greatly reduced. I think my breaking fees are waived when the loan has reached 5 years.

And the problem is, the lender you're dealing with knows that 95% of the time a customer will bauk at the breaking fees, so trying to threaten that you will walk generally falls on deaf ears.

4Vman · 09-11-2008, 08:38 PM

Quote:

Originally Posted by Yellow_Festiva

This would be a good idea, but the break costs may be a lot more than the saving you will gain.

Some folk on the radio last week were saying that they would be up for $12-18K to switch lenders. (GE seemed to be mentioned a lot in these discussions)

Hardly worth it to save perhaps $100 a month.

If you have a largish variable loan over around 3 or 4 years old than the breaking costs are greatly reduced. I think my breaking fees are waived when the loan has reached 5 years.

And the problem is, the lender you're dealing with knows that 95% of the time a customer will bauk at the breaking fees, so trying to threaten that you will walk generally falls on deaf ears.

The Govt has just introduced legislation prohibiting penalties for breaking variable rate loans i think, the only issue people face is breaking fixed term loans.

XESP351 · 09-11-2008, 08:58 PM

I fixed my rate at the start of the year at 7.94% which isn't too bad except that this was only valid for 3 months and since my construction loan started being drawn down after about 5 months from locking the rate, it reverted to the interest rate at the time which was....wait for it....9.25% fixed for five years. It would cost me more than $30k to break that fixed term which is hardly worth it. Its an unfortunate situation but one that many people are currently in. Luckily my loan is part variable part fixed.

One way to soften the blow though if you have part fixed part variable loan as i do is to change the fixed loan to 'interest only' which you can easily do for a small fee. Then you devote all your repayments on the variable portion and only make interest repayments on the fixed part. This will pay your variable a lot quicker and i may even be able to pay it off as the fixed portion matures and becomes variable then you only have to pay that off. My loan is one third variable and two thirds fixed.

That plan is what i was advised by the bank, and to me it makes sense and the best way to get the best out of a bad situation.

EgoFG · 10-11-2008, 12:14 AM

Fixed rates are an interesting beast.
The bank determines the rate based on the probabilities of expected market movement.
Softened a little by the fact that they have a guaranteed income from you(the fixed percentage - assuming you meet and do not exceed your repayment obligations).

I am just a punter, the guys in the bank get paid the big bucks because they understand the economy, and have a good idea what rate movements might be like in the 3-5 year period .... not only that ... guess who sets the rates !

Generally it will only be to the customers' advantage when the bank's analysts get it wrong.

SB076 · 10-11-2008, 12:28 PM

When is the next RBA meeting?

balthazarr · 10-11-2008, 01:02 PM

Quote:

Originally Posted by SB076

When is the next RBA meeting?

2 December 08. The Board usually meet on the first Tuesday of each month, except January.

http://www.rba.gov.au/EventsDiary/calendar_2008.html

XWGT · 10-11-2008, 01:21 PM

Quote:

Originally Posted by 4Vman

The Govt has just introduced legislation prohibiting penalties for breaking variable rate loans i think, the only issue people face is breaking fixed term loans.

True however I believe the legislation only effects new loans, not ones already entered into. So unforutnately those with break penalties in their contract (me) are stuck with them until they expire. Which is fair enough considering I signed the document knowing the costs.

Bent8 · 11-11-2008, 01:02 AM

Quote:

Originally Posted by balthazarr

It may technically not be collusion, but isn't it convenient that the big four happen to have the same rates, and they just happen to reduce their rates by the same amount - surely all four can't have the same overheads?

Be very glad that we still have the 'four pillars'... though I suspect that will change in future. There has been talk of the big four merging to create the big two... with all of this financial turmoil, they may be able to convince the government to let them do it.

Competition is healthy... but it's still way too costly and time consuming to switch mortgagees. I believe the government is working on a scheme to make it easier and cheaper - I guess we'll have to wait and see what the outcome is.

I think you're onto something there...

http://www.msnbc.msn.com/id/27441147/

Competition is definitely healthy and needed but the big Banks and the Govt have other ideas...