by Chris Becker
Oh it’s been a fun day so far trading Aussie dollar! First the numberwang unemployment print, now the National Australia Bank (NAB) hiking interest rates out of cycle. Bang comes down the Australian dollar:
From the horse’s mouth:
NAB Chief Customer Officer – Consumer Banking, Mike Baird said the decision to increase rates was not taken lightly as the bank sought to achieve the right balance between rewarding customer loyalty, shareholder outcomes, and responding to sustained increases in funding costs.
“Our decision to hold our Standard Variable Rate since September last year, the only major Australian bank to do so, has led to around $70 million remaining in the households of more than 930,000 NAB customers,” Mr Baird said.
“We wanted to reward our existing customers for their loyalty and held off as long as we could despite being subject to the same increasing wholesale funding costs and market pressures as other major lenders.
“We have been deliberate in our approach to limit the impact on owner occupier borrowers by keeping their rates as low as possible to encourage both new and existing customers to pay down their loan sooner.
Nearly 1 million customers do not trump the shareholders who need their dividend to remain intact.
Who’s next?
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What next from the lunatic RBA?
The Deflation Bank of Australia faces a
Translation: $30m of lost PBT is the pain threshold. We’ve screwed depositors for $40m of the $70m we granted the borrowers, but once the net cost hit $30m, we’ve got to protect the shareholders.
PS. UBank steady at 3.59%
haha yeah yeah. Does it really matter though, Peach? The whole point was that we’d see them forced to continue hiking out of cycle.
Pls replace trollface with eggface, pls. Thnks.
😁👍
https://media1.tenor.com/images/997676096852ca4e597b68c188f1615a/tenor.gif?itemid=3561328
https://www.youtube.com/watch?v=3GwjfUFyY6M
“PS. UBank steady at 3.59%” – question is for who?
Their customers, mate.
Peachy – do you know if they are growing market share?
No, I don’t know.
Peachy may win the bet but sort of irrelevant if UBank has f#ck all percent of the market and everyone else is raising rates.
Arrow2 – reason I asked about market share is I think UBank uses this low rate to attract new high quality customers and retain good customers too. I doubt this rate is available to all of their their customers when they need to refinance.
I think UBank is probably quietly sending poor quality customers away (offloading them when their IO loan expires) and replacing them with higher credit rating customers. UBank probably accepted to operate with lower returns for foreseeable future in order to strengthen the quality of their loan book.
Just speculating here.
Have a look at AFG’s ASX release today which shows the ratio between broker referrals to major and non-major banks.
It used to be around 75:25 a few years ago, last quarter it was 58:42. So the non-majors are rapidly gaining market share, while overall volumes are falling
UBank is owned by NAB so I don’t know if it is treated separately for this sort of statistic.
Interesting mix of discussion I remember from back in late December regarding UBank fixed:
https://www.ozbargain.com.au/node/428882
Not the last hike we’ll see. Feeling da squeeze.
Peachy must’ve missed the target with her tweezers … I guess she went for the smallest tree in the forest 😀
😂👍
Could this be more about capital than it is about profits?
RE agents ordering more for sale signs
Would have to see delinquencies spiking before we start worrying about our “well capitalized banks.” It will just be about NIM/profit at present.
Hows about a chart of the BBSW on the verge of breaking out to new highs?
Everyone loves a new high!
+1
Yep BBSW trading higher than at any other stage in the quarter for the past 2 years!
24/01/2018 1.78
24/04/2018 1.745
24/07/2018 1.69
24/10/2018 1.7
24/01/2019 1.785
24/04/2019 2.055
24/07/2019 1.9682
24/10/2019 1.9234
24/01/2019 2.0811
It’s a beautiful thing: 100bps from here and the sucking sound will be deafening. Cue panic at the RBA as they slash 50bps …. and then another 50bps …. and then head to the Govt-approved multi-faith prayer room.
Cue Peachy in 3,2,1…
UBank won’t be far behind
Too late! 😀 See above
You got the ‘cue Peachy’ bit right but I’m not sure about U-Bank’s headline mortgage rate — 3.59% has almost become an entrenched part of the name. Hoist by their own petard!
Call RBA cut in Feb.
I did already and if not Feb then March starts to look more and more like a perfect candidate. NAB will probably open the gates for number of smaller lenders to announce hikes.
Jason and I have a few bucks on Feb rise at 26:1 with easybet.
Feb way too soon given employment numbers. Phil Lowe doesn’t actually want to cut and employment numbers give him an excuse not to.
The slope of hope.
Fake unemployment rate fall is made for RBA to justify rate hold.
No cut before elections
It won’t matter. These rises are driven by funding costs in international markets where the RBA rate is irrelevant.
The banks rely on international funding for 40% of their lending.
Watch the following to understand. https://www.youtube.com/watch?v=tR3ZeTTTICY&t=2992s
A lone voice in the wind.
RBA cutting rates will unleash economic Armageddon on the Australian economy via inflation and currency devaluation. Would be harmful to economic activity and demand – this is not 1992.
Further RBA cutting rates into retail banks raising rates would look hideously incompetent – right when the commission report is due. Having the RBA cut and retailers raising with ASIC and APRA incapable of addressing the issue would just look like an absolute disaster for the RBA – let alone the LNP.
People need to seriously start rethinking their interest rate setting strategy – because its like listening to Rene Rivkin talk up the prospects of Swan Beer.
Honestly – you can download an update to your economic understanding from the Play Store or the App Store for less than $0.99
Get on it.
Why does it feel amusing that Baird is still screwing the public? 🙂
’cause he’s a d*ck clown?
cause he’s just doing god’s work?
Why are so many openly corrupt people doing God’s work?
Don’t answer. I spent my formative years in a ‘religious’ town. I know the answer.
Read the name as Mike ‘Taird. Amusingly the rest of the excerpt was the ‘taird thoroughly polishing the turd for public consumption.
Cue Australia Banking Associations Anna Bligh…
He certainly brightened up Sydney nightlife, eh?
Mike Baird….sucking the joy out of absolutely everything, in God’s name.
Sydney has become so dull I am trying to understand why house prices are so high? Do people really want to move here? I’m somewhat desperate to leave now.
Got the letter from Mystate yesterday. Another 0.11%p.a. from 29 Jan to 3.99%.
Interesting – thanks
6.41% for Investors on IO from the 31st. That’s a hop, skip and a jump away from 7%. The magic number that I’m sure NAB totally assessed all their mortgage applicants against.
And when it hops over 7% and all their magical thinking unicorn mortgages go belly up? Not long now
Yes was thinking same
Not too long ago folks were thinking 7% would never happen
Nobody is paying that.
Take a 2% discount right off the top. This is why I track UBank – filters out the bull crap marketing and reflects all the discounts.
Whats the opposite of this statement ?
False.
I reckon you’re underestimating the stupidity and overestimating the financial literacy of the average punter.
Do you think a bank would pointlessly advertise a product that had no customers and made them no money? No, because the only thing that exists for them is the relentless pursuit of money.. There are lots of people…savvy investors snapping up and pouncing on (h/t Nik) bargains…who don’t know any better and are paying those rates.
You need to read the small print: 3.59% is available to only the most gilt-edged borrowers.
The plebs either get told to f*ck off or they get shown a rate at which UBank is willing to take the risk i.e. 5%+
Martin North’s latest video is a must watch for understanding these issues and the funding pressures faced by the banks. In short the message is that more hikes are coming.
https://www.youtube.com/watch?v=tR3ZeTTTICY&t=2992s
PLUS: Think Aussie banks could be pushed to also raise rates due to Basel Tier II funding costs. APRA requires them to raise an additional $75Billion in Tier II bonds to meet “To-Big-To-Fail” capital requirements…..otherwise QE taxpayer bailouts.
Don’t believe it. Isn’t Mike busy on personal leave to deal with ‘family issues’?
I see people like him around my area and have to try super hard to bite my tongue.
Headline of the day: “Aussie homes losing value of a smashed avo breakfast every hour”
https://www.oneroof.co.nz/news/35876
Who the heck pays 5.24?!
https://www.newcastlepermanent.com.au/personal/home-loans/real-deal-home-loan
People such as Sum Ting Wong and Sum Dum Fuk who happily launder Chinee munee through Australian real estate.
I think I’ve heard of those two blokes. Do they live in Au Phuq Dup?
5.24 is cheap to launder money.
So you have a FHB 2 year teaser rate at 3.69% that will jump to 5.36% !!
That’s a huge jump! Hook the Giddy FHB who has scrapped together the deposit, borrow 6-7x income only to realise that after 2 years their rate jumps to 5.36% and they have difficulty repaying.
Not to mention that after 2 years fixed they have not made a dent in their principle and by then the economy is in full down swing and their apartment price is down 15%
Royal commission into banking NOW! Oh wait….
That’s from the US, pre-GFC playbook. Teaser rates that were not able to be rolled over into a new mortgage term were the catalyst for spiking delinquencies.
Agree. They left plenty out there to fester.
https://www.smh.com.au/politics/federal/afterpay-accessing-electoral-roll-data-under-laws-designed-to-target-terrorism-money-laundering-20190122-p50sw4.html
How about using the electoral roll to ensure that existing houses are purchased by eligible buyers? Apparently the data is a free for all…
It’s fixed rates, that jump after 2 years, but it is still P&I, not IO.
But yes, it might be difficult to refi after the 2 year period when rates jump 1.5%.
Nobody rolls to the Standard Variable Rate. That’s just a reference rate and staff don’t sell it. They sell the discounted package rates or Basic Variable which are far, far lower.
You gotta love teaser rates: the punters think “two years from now I’ll have won the lotto or got a promotion!”
Or, simply: “Two years is an awful long way away — I’ll deal with it then.”
Just back from inspecting a terrible property for a multiple IP owner, interest only of course. The costs to rectify should scare them into selling one, but no….the influence of nathan and dymphna is mind boggling. I fear a world of hurt is comming their way.
I don’t understand. If NAB is the last to hike, the others have done so already, so why the change in the AUD?
Something else is going on….
Think traders just realised how much this puts pressure onto the RBA to lower teh rates.
Rates are supposed to go up when growth is solid. Rates going up when house prices going down is a big flag that the RBA narrative is cracking.
China
China trade war
American interest levels rising and economy strethening (ignoring the recent Trump tantrum)
International reports on Oz economy slowing and high debt levels
The rose coloured glasses are coming off our mud guard economy – showing it’s shiny on top and covered in crap underneath.
Big bank holdout joins rivals and lifts mortgage rates
https://thenewdaily.com.au/money/consumer/2019/01/24/nab-raises-mortgage-rates/
Sweet. And there’s still plenty of time for the others to get in a rise before Australia Day.
My fixed loan is going to expire just when it started beating variable. Doh!