Shawn Kristofer – Real Estate

Here’s some interesting tid-bits from Brad Gooda of  Smartline Stones Corner

(an excellent Mortgage Broker I know who I also personally use).

The RBA recently increased the cash rate by 0.25% in an effort to dampen down an economy that appears to be moving back into a growth cycle.

A growing economy is a good thing for our general prosperity but growth can be quickly neutralised by the affects of inflation. Unfortunately for mortgage holders, the primary anti inflation weapon the RBA has at it’s disposal is to increase interest rates.

As we appear to be coming out of the global financial crisis, I thought you might find it interesting to view the new landscape.

• RAMS is now owned by Westpac.
• Wizard is now owned by Aussie.
• Aussie is now 33% owned by CBA.
• St. George is now owned by Westpac.
• CBA now owns Bankwest.
• The big 4 banks now write over 92% of our home loans compared to 60% before the GFC.
• The margin between the RBA cash rate and the variable rate available to bank customers is now approximately 2.1% compared to approximately 1.1% before the GFC.
• NAB has purchased approximately 35% of all mortgage broking groups.

Most lenders now require borrowers to contribute 10% of the property value compared to 5% (or even 0%) before the GFC.

There is however one industry characteristic that has weathered the storm. The profits being generated by our big four banks. The extraordinary revenue margins and increased market share created by the GFC has allowed the banks to maintain profits despite a large increase in bad debts.

Profits: CBA – $4.4 Billion, NAB – $3.7 Billion, WBC – $4.5 Billion, ANZ – $3.3 Billion, Total = $15.8 Billion!

It is interesting to note that the ANZ Bank is forecasting a 1% increase in the cash rate over the next 12 months (see graph below). It’s tempting to jump into a fixed rate in an effort to avoid the increases but as you can see from the graphs below, the big banks are well ahead of that idea. The five year fixed rates and the three year fixed rates have been shooting up since March.