BOQ kicks off next round of mortgage rate hikes

As predictable as the Sun rising:

BOQ today announced interest rates across a range of lending products will be increasing by between 11 basis points (bps) and 18 bps.

  • The Economy Owner Occupier Principal and Interest rate is increasing by 11bps
  • A number of other BOQ home loans and lines of credit rates are increasing by 18bps

While the changes affect a number of products, there is no change to BOQ’s Clear Path Owner Occupier Principal and Interest rates.

Lyn McGrath, Group Executive, Retail Banking said today’s announcement was a combination of a number of factors.

“Continuing funding cost pressures and intense competition for term deposits have contributed to this decision,” she said.

“While decisions like these are never easy, offsetting the impact of these costs ensures we balance the needs of our borrowers, depositors and shareholders,” she said.

The interest rate changes are effective Friday, 11 January 2019.

Front and back book. BBSW has been on a charge though may have peaked for now:

Term funding has been drawn in as well:

Leaving the banks little choice, via Credit Suisse:

You may recall that it was the regionals that kicked off the last round of out-of-cycle hikes. The majors will be next, managed around the release of the Hayne recommendations.

The economy is slowing fast, dragged down by the housing correction. The last thing it needs is tighter monetary conditions.

RBA to cut.

Comments

      • HnH, I noticed from recent credit aggregates that Broad Money is flat. Does this mean as there is no growth in their number depositbgrowth is zero and therefore pricing for deposits will rise ?
        Is this the “Swelling dollar” affect described in the debt deflation theorem

      • I said over the break to friends I was amazed the banks hadn’t used Christmas, australia getting thrashed in the cricket, wall St’s 5% jump and trump’s wall as the necessary distractions to raise rates. They may well be worried about the RC, but they are, after all, grubs at heart and clearly not that bright either. Doing it now as everyone kicks back into work mode is sloppy timing and a huge missed opportunity to put the boot in while we were at the beach.
        How long before the minors and majors start singing this tune? Before Invasion Day? Or would “back to school” be more apposite?

  1. Silly question: How will the RBA cutting – again – achieve anything good, when it was their continued cutting that got us to this point?

    Seems we’re circling the drain. We can either take our medicine now, or later when it will hurt even more. This has been put off for a long time. It’s hubris to think we can cheat the system indefinitely.

      • C.M.BurnsMEMBER

        That was Australia Senior’s middle name.

        This is Australia Junior. The entitled, arrogant, selfish, narcissistic little pr1ck offspring that inherited the fortune with no understanding of what it took to earn it.

      • “The entitled, arrogant, selfish, narcissistic little pr1ck offspring that inherited the fortune with no understanding of what it took to earn it.” you’re talking about baby boomers right? I don’t see anyone below them inheriting sh1t.

      • Jumping jack flash

        ” I don’t see anyone below them inheriting sh1t.”
        Their fortune is fake – it is just someone else’s debt – the debt of those below them. The very act of them manipulating the economy and its systems so they could appear “rich” caused it to fail.

        After the debt is repaid what is left over will be worth less than zero due to the interest.

        Not just in Australia either, it is pretty much a global problem caused by human nature and insatiable greed fuelled by as much unproductive debt that was necessary to get it to work.

  2. “Certain as the sun
    Rising in the east
    Both a little scared
    Neither one prepared

    Beauty and the beast”

    I think that infestors are the beauty here, BOQ is the beast. Possibly the other way around.

      • Jumping jack flash

        a cut would be ineffective anyway because what the indebted rubes would gain in debt service relief (in the unlikely event banks passed it on) they would lose from inflation due to a weaker dollar.

      • HadronCollision

        It’s fairly ridiculous to pain anyone with debt in the same light . Lots of people are indebted.

      • Yes, as soon as unemployment even starts to look like increasing the RBA will cut rates and make an announcement which sounds like – “due to the increase in unemployment (cough – bank funding costs – cough) we have decided to cut the official cash rate….”

  3. Low rates and QE to offset the withdrawal of foreign capital as our rates plunge is probably the only way out of this without being Iteland or Argentina. In a weird way I hope they do it soon before momentum forces them to do it harder – the less corrective action required the better.

    • Few, thats sounds good. For a while there I was worried that Australians might experiance some financial hardship after blowing one of the biggest credit driven asset bubbles in history. I feel better knowing this can be easily fixed with a couple of rate cuts and a bit of QE.

  4. Jumping jack flash

    BOQ is probably the most dodgy, but it shows that it doesn’t take a lot before the immense risk is realised.
    That’s not to say any of the banks are finally considering other kinds of risk than LVR, it is more likely that LVR is looking a bit uncertain… risky… if you will.

    “The economy is slowing fast, dragged down by the housing correction. The last thing it needs is tighter monetary conditions.
    RBA to cut.”

    RBA can cut all it likes, take the axe to the IR and chop them down to 0. The private banks are in charge and will need to pass it on which is probably unlikely, due to their banks. But who knows what happens in these backroom deals.

    • Banks don’t mark to market the value of commercial or residential security so from that perspective they are insulated as they’ll only take a hit when the property is revalued. Which for most is never, unless there is a refinance event. I don’t think switching from IO to P&I will trigger a revaluation.

      It’ll be interesting to see how the RBA manages the rate cuts, will it be 25 or 50bps increments. 50bps seems like a panic.

      I’m predicting outrage in the news once people start to realise that the mortgage insurance they’ve paid thousands of dollars for is to insure the banks, not to mortgagee.

      • I thought there were some triggers for banks that mean it requires a revaluation on the banks books. Sorry have no back up for this. Just remember having read it somehwere. It was to avoid what the banks did in GFC… delay having to show the losses on their books.

    • HadronCollision

      On what basis do you make the comment BOQ is the most dodgy.

      We’re considering moving our mortgage from WBC to BOQ to save 14bps and gain an offset so if there is anything I should be aware of it would be good to know

      • I have been with BOQ for 20 years and am in the process of getting my second loan from them. It is incredibly painful. They are slow, bureaucratic and focus on minute detail. Forget the history you have with them … that is not counting for anything. Be prepared to waste a lot of time and experience high levels of frustration.

      • “They are slow, bureaucratic and focus on minute detail.”

        As opposed to you walking in, fogging up a mirror, and they give you a million bucks?

  5. So the cost of Funding on an international basis is going up …. well this will be fun for the RBA to get their heads around, they don’t have control over the cost of funding.
    Catch 22: if they cut, the economy is weakening, and the banks don’t pass on the cuts anyway or the hold and the costs increase and the banks strangle the economy into recession.

    Fun times … Popcorn ?

      • Can’t say I understand the bond market much. Yield goes up, price goes down and vice versa. Where’s the (decent) return going to come from? Seems to me bonds are purely defensive unless you’re the idiot thinking Argentinian bonds and their ilk are a yield play. HnH says buy Aussie bonds. Would someone explain how at their low rate of interest this makes sense even if the RBA cuts rates and the AUS $ tumbles. An example would be handy, anyone?

      • Well if yield goes from ~2% as now to 1%, the price doubles. Kinda. For a very long-term bond.

        My thinking is more like yours. If the rba cuts rates further/hard and Australia poops itself and the AUD tumbles, i think it would be good to be holding US bonds.

        Especially if US is perhaps near the top of its interest rates and might start backsliding over the next 24-36 mnths

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