15th Oct 2015
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Westpac’s rate increase “greedy”
Westpac’s rate increase “greedy”

Westpac is facing harsh criticism in the wake of its decision to slug borrowers with a 0.20 per cent mortgage rate increase – and there’s concerns that other banks will follow suit.

The nation’s second-largest bank (by assets) is being accused of corporate greed, with Opposition Leader Bill Shorten saying that the bank’s decision to increase its rates when the Reserve Bank of Australia (RBA) is doing its best to assist the economy is “incredibly disappointing”.

Westpac responded by saying that the increase will help cover the cost of new capital requirements. However, Treasurer Scott Morrison believes the rise is excessive and well over the amount that he was advised would be enough to cover new regulations set by the Australian Prudential Regulation Authority (APRA) in July this year. The new requirements stated that banks needed to increase the amount of capital they held in relation to their mortgage loans.

Last year, Westpac posted net profits of $8 billion, which was an increase of six per cent on the previous year. Its cash earnings also rose three per cent to $7.82 billion and a further $3.5 billion was raised through discounted share issues to shareholders. All this was being done to raise its capital reserves.

It’s no wonder then that Mr Morrison has accused the bank of gouging its customers.

What’s more worrying for mortgage holders is that there are concerns of other opportunistic banks following in Westpac’s footsteps.

"After the cash rate from the Reserve Bank kept going up ... the banks matched it exactly and then when the cash rate was on the way down the banks didn't match it exactly," said Labor finance spokesman Tony Burke.

The 0.20 per cent basis point increase to Westpac’s standard variable home loan will mean that borrowers will have to pay an extra $45 a month on an average home loan of $350,000.

What do you think of this? Is Westpac within its rights to increase its mortgage rates, contrary to the intentions of the RBA? Or do you see it as gouging? Would a move such as this encourage you to switch banks?

Read more at The Guardian

Read more at www.sbs.com.au





    COMMENTS

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    Chris B T
    16th Oct 2015
    9:31am
    Wait till the interest rates rise by 2% then you will hear the cry's of despair.
    Not worth the Press or Government comments, sorry but should had factor in at least 2% rise at these Historical Lows. Borrow else where if really concerned a BEAT UP.
    MICK
    16th Oct 2015
    11:24am
    I agree Chris. A total beat up.
    What Leon avoids is the fact that ALL the banks are going to follow suit and that record low interest rates, whilst good for borrows, has totally distorted our financial system. The reason so many retirees are struggling is the zilch interest rate environment, which also results in reckless spending from citizens and corporations. It will end badly as the world debt is now around $230 trillion. To get your head around that figure 1 trillion is one million lots of a million. Unimaginable sum! And growing.
    Rae
    16th Oct 2015
    2:23pm
    The volatility in the debt market is scary.

    We have 0% interest rates in the US but the bond market is showing rising prices.

    You are entirely correct mick and a fair amount of that huge debt is pure junk riding on resource companies that are about to blow up.
    The GFC will look like a picnic when that loss hits and liquidity dries up.

    All those borrowing hundreds of thousands of dollars should have factored rising rates and falling incomes into the equation as it is common knowledge we are 40 years into a neoliberal capitalist experiment being run by a bunch of central bankers. It will get a whole lot sillier before it blows up.

    Many of us were caught out with the high interest rates last time around. I was paying 21% towards the end and was forced to sell a house at a huge 30% discount to get out of the strife I was in.

    When it happens again there will be wailing and disbelief that this can happen.

    Small rises in rates may save a few from making errors in borrowing more than they can afford.
    fordyoot
    16th Oct 2015
    10:11am
    Banks are lazy greedy institutions and provide little in the way of contribution to Australian economy. They take billions out of the economy and put nothing tangible back. It is no wonder that there is little productive and industrial activity left in the country.
    Adrianus
    16th Oct 2015
    10:20am
    fordy you may have a point but there are many business owners who would not have been able to grow their businesses without the partnership of a bank.
    Bonny
    16th Oct 2015
    10:40am
    I love banks. They give me money to do what I want and when I have money they pay me interest and dividends.
    Adrianus
    16th Oct 2015
    10:44am
    Speaking of which. The WBC distribution of $0.94 is around 6%.
    les.61
    16th Oct 2015
    10:50am
    How do you take billions out of the economy? The profits go to superannuation funds and shareholders. Would you prefer to have the Greece situation and not be able to get cash for 2 or 3 weeks. Be crying like a stuck pig them!! Part of the rise is to cover new capital requirements put on by the government who then expect the banks just to wear the extra cost. Remember there are lots of financial institutions in Australia and if you do not like one move to another.
    Happy cyclist
    16th Oct 2015
    11:26am
    Banks are businesses. Businesses want to make profit. They are not charities. Over the years many small, local banks and building societies have tried to get into the business but we, the customers, don't support them apparently and they eventually seem to disappear. If people cannot affrord this miniscule rise then they have borrowed far too much. Sorry, but it seems that many people are just as greedy in their own way as the banks.
    Bonny
    16th Oct 2015
    10:39am
    Why Westpac? NAB put theirs up 20 odd basis points a week or two ago and media said nothing.
    MICK
    16th Oct 2015
    11:25am
    They will ALL follow. That is how it works.
    Adrianus
    16th Oct 2015
    12:11pm
    Wrong mick, the others have already raised the required capital.

    16th Oct 2015
    10:40am
    PERHAPS this small increase will have a positive effect on increasing investment interest rates for those of us trying to keep ahead of inflation.
    Adrianus
    16th Oct 2015
    10:46am
    What Leon's piece does not mention is that deposit rates have also increased.
    Bonny
    16th Oct 2015
    11:24am
    Nope it all to do with profitability to appease their shareholders. If they can borrow more cheaply on the money markets than what it costs for deposits then deposit rates suffer. If you don;t like what you get interest rates then buy the banks for a much better return.
    MICK
    16th Oct 2015
    11:28am
    Yes Eddie. What Leon also does not mention (probably does not understand) is that money needs to be priced accordingly. At current rates retirees do not get a fair return and reckless spending occurs across the spectrum....creating more debt of course. An endless cycle which nobody is going to enjoy when it ends....with results that mums and dads cannot even imagine.
    Adrianus
    16th Oct 2015
    10:42am
    Last time I listened to Glenn Stevens talking about the official cash rate level I got the impression that the board has now reached a level of monetary policy impotence. I think Shorten is making a political statement only because at these low rates those who have the courage have borrowed already and those who have not are waiting for the RBA to move it's foot close to the brake pedal. Many developers shelved plans for major projects when we put an incompetent, inexperienced bunch of union hacks in government during 2007, at a time when we needed strong economic leadership. Some of these planned projects are only now getting the dust blown off.
    pete@nakedhydroponics
    16th Oct 2015
    11:03am
    Gee wouldn't it be great if we had something like a government owned "Commonwealth" bank, to offer genuine competition and keep rates down.
    Bonny
    16th Oct 2015
    11:21am
    I think we have enough banks already.
    Anonymous
    16th Oct 2015
    11:22am
    In Victoria we used to have a state owned bank called the "State Bank" but the labour party here lost it through there incompetence.
    Anonymous
    16th Oct 2015
    11:24am
    The government stifles any type of competition. It is hard enough as it is right now trying to politicians honest with their own travel expenses, let alone giving them a financial institution to run. Would you put Dracula in charge of the Blood Bank?
    MICK
    16th Oct 2015
    11:29am
    Huh??? Ratea ARE down. Lowest in living memory. What do you expect?
    Adrianus
    16th Oct 2015
    12:20pm
    pete, maybe the government should get into hydroponics as well for the same reason. We would have to wait for the unions to get back in for that to happen though.
    Gerg
    16th Oct 2015
    11:31am
    So the regulatory authority is concerned at the capital adequacy of the banks and hence ability to withstand pressures of economic downturn and stipulate an increase in reserves. The banks respond by raising equity and increasing prices (interest) to comply with the new rules. Now the pollies cry foul. What would the critics do? Get taxpayers to fund the banks!
    MICK
    16th Oct 2015
    11:55am
    People need to realise that banks lend money on funds they do not have. In effect they 'create' money which is not in existence. Here lies the problem: if the value of assets like real estate halved (quite possible!) then borrowers would walk away leaving the keys on the kitchen bench. This has happened before. So then banks are faced with stumping up money they simply do not have. What happens is a bank collapse. Now we are talking serious consequences as the (bank) dominos fall one after the other.
    The solution to the above is to force banks to keep more cash to cover their loans. This is what capital adequacy is about. Has to be a good thing. A pity Leon does not have an understanding of why this is happening.
    aly_rob60
    16th Oct 2015
    2:14pm
    People seem to forget that we were paying up to 17.8% interest on loans in the 1980s......things were tight, but we managed OK.

    This is just the beginning....our economy is about to nosedive, due to the fraudulent nature of global economic growth.

    Debt has to be purged from our system....and I am talking about personal debt and our love of credit cards, private debt for the companies who have borrowed unnecessarily and public debt for the State and Federal Govts who insisted on borrowing billions, just to make them look good with "stimulus packages" such as $1000 handouts, the school building program, the housing insulation scheme and such like....just to buy votes and make themselves popular. All in the meantime LYING to us about how good things were!

    Wake up Australia! We are not the "land of opportunity" any more and haven't been for years. We are in debt up to our ears and now we are going to suffer for it.

    All the warning signs are there......China is lying about it's economy, it's gold reserves and the property boom there. They have been buying our iron ore and making consumer goods that we simply don't need! Cars, whitegoods...you name it! Where is all going to end and who is going to have the money to buy it?

    The US has high unemployment, defaults on home loans and credit cards and the same thing is going to happen here, if it hasn't already.

    Our Govt is NOT being honest about our unemployment figures.

    2008 was just a hiccup in comparison to this....and I lost my dearest friend to suicide, just because he was playing the sharemarket and lost lots of "play" money.

    As Paul Keating once said "This is the recession we had to have". and it is going to happen again.
    MICK
    16th Oct 2015
    3:28pm
    You have some understanding of the issues aly. Most people do not and go along as if as in the past everything will be ok. I think that this one is different though and I believe that when the world banking system crashes it may be 1920 Germany rather than 2008 GFC.
    Makes you want to have cold one before there is no money to buy anything. Scary. As always most people will choose to not believe. For their sake I hope they are right.
    Rae
    16th Oct 2015
    6:14pm
    I do hope you are wrong mick as a deflationary depression is far better than what you are suggesting.

    The price increases for food and water at present do not bode well though.

    The traders are paying $300 a megalitre right now and pricing farmers out of the deals.

    Rome burns and the ALP and NLP play silly games with each other.
    Reeper
    16th Oct 2015
    11:43am
    I don't pretend to understand the finance world, but if you read enough you will start to realise that this rise is in reality quite insignificant. I note some respondents are trotting out the usual rubbish that banks take in money and give Australia nothing back. That sort of uneducated rubbish is more scary than a small rate rise.
    Banks are businesses and need investments which need to be repaid with interest to the investors. No one makes millions on shares in a single bank. For the mum and dad savers there are small profits (because interest on bank lending is low) and for major investors the huge profits come from a wide range of investments alongside their banking ones.
    Banks provide the money for major construction...your local shopping centre and so on. So please, criticise banks for their poor customer service not for being banks
    Adrianus
    16th Oct 2015
    12:37pm
    Reeper you are spot on with that post!
    Labor have always used this politics of envy to create some tribal hatred in their not so bright followers. People like mick parrot people like Wayne Swan without thinking for themselves.
    Supernan
    16th Oct 2015
    11:43am
    Thank goodness interest rates are going the right way at last ! However 0.2% is very low increase. On our home loan we paid rates which started at 10% & rose over 20% & still paid it off on time.

    Our banks were very greedy in the past but are better now. They are also very safe - unlike many countries banks - as they are heavily regulated. Without them most couldn't own houses !

    They get a lot of flack but they are a business. Like every one, they need to make money & pay dividends to share holders & pay taxes. They also pay interest themselves as they borrow from other banks to some extent.

    They add more to the economy than wealthy miners who make money by selling resources that belong to us, get taxpayers subsidies to do it, make millions & pay no tax !
    MICK
    16th Oct 2015
    11:57am
    Don't hold your breath Supernan. Whilst this is what is needed governments and their buddies in the big end of town are keeping rates down as they fear what will happen if they raise. Damned if you do and damned if you don't.
    Ronin
    16th Oct 2015
    11:50am
    Corporate Greed! There's a surprise! Create a new National Bank owned by the people, as per the old Commonwealth Bank.
    MICK
    16th Oct 2015
    11:58am
    Less about "greed" and more about common sense. Better than creating an environment where banks will collapse (think about Cyprus, Greece and the US after the GFC).
    Kato
    16th Oct 2015
    12:09pm
    And our pollies as usual come out firing.to try and gain a bit of political mileage. And as usual the shots are blanks.
    Young
    16th Oct 2015
    12:14pm
    The banks are not the greedy ones.
    The young ones who want nothing but the best and want it now are the greedy ones.
    We saved up for what we wanted and when we had enough money we then bought it.
    Glad the deposit rates are finally rising as my 93 year old mother has to live off the very low interest.
    MICK
    16th Oct 2015
    1:45pm
    A bit of common sense there. You are of course correct but remember that genYs have only ever known the good times, had everything money can buy thrown at them and have a 'now' expectation whilst most live like there is no tomorrow. And when things go wrong it is not their fault.
    Dollars over Respect?
    16th Oct 2015
    12:19pm
    One bank's net profit of $8 billion! - whose belt needs tightening?
    les.61
    16th Oct 2015
    12:22pm
    Where is your super invested?? Bank shares would be part of them!!
    MICK
    16th Oct 2015
    1:47pm
    Many retirees live off bank dividends. Stops them asking for a pension. A return of 6% is not bad but given the risk in bank shares should the ponzi scheme which has been running in the world banking system collapse then will you feel sorry for those who own bank shares as they do their dough.
    Its not that easy sometimes Dollars. I believe Malcolm Fraser once said as much.
    BnT
    16th Oct 2015
    12:30pm
    Has anyone out there read a book about the fall of Enron and everyone else they took down with them? Raising funds to support the "money" that doesn't really exist in the deals that have been made around products that either don't exist, don't have the value they are supposed to have according to the deal etc etc... financial disaster and nobody has learned any lessons.....can you point me in the direction of a desert island please?
    MICK
    16th Oct 2015
    1:50pm
    The day of reckoning is coming and just like the GFC (small change!) what comes out of this will be astounding. Many people will be badly burnt as the biggest financial fraud ever overseen by governments and their Central Banks implodes. Ok, an unpopular point of view and easier to say she'll be right.
    aly_rob60
    16th Oct 2015
    2:17pm
    You are spot on Mick...the day of reckoning is coming!
    Dollars over Respect?
    16th Oct 2015
    12:32pm
    Treasury believes 'the rise is excessive and well over the amount advised would be enough to cover new regulations set by the Australian Prudential Regulation Authority'. "Greed" is the issue and the point being made, not making a reasonable profit.
    Adrianus
    16th Oct 2015
    12:47pm
    Has treasury based that opinion on the capital raising alone? With no thought about WBC's rate restructuring and dividend distribution? WBC has a responsibility to hold it's share price as well as meat prudential requirements and I think they have juggled things very well. Treasury may be covering their own a#+e because they are the originators of the increased capital requirement?
    MICK
    16th Oct 2015
    1:51pm
    "Treasury believes" is of course the problem. Not too sure if anything coming from Treasury is believable.
    Adrianus
    16th Oct 2015
    1:57pm
    Well they surely would have provided an impact statement to APRA and/or the government. Is it possible that Treasury forecast an entirely different result?
    Bobeye
    16th Oct 2015
    1:36pm
    The BIG 4 banks are all the same pay low interest on deposits and charge like wounded bulls on loans, particularly Credit Cards.

    I changed to a Credit Union about 15 years ago and enjoy all the services of banks but with more generous rates on interest rates on Savings and Term Deposits. The Credit Card rate is well below the going rate on Purchases and Cash Advances charged by the Big 4.

    There also BPay and other options for paying Monthly Accounts automatically and casual accounts that only occur once a year (club memberships for example). There is also a Cheque Account for when I don't want to disclose my Credit Card details, it also handy for sending money to Grandchildren as presents.
    MICK
    16th Oct 2015
    1:52pm
    If you think ours are bad Bobeye then go to America. Interest rates of around 0.2%. A joke. And we are heading the same way as our government tries to force investors into ASSETS to stave off deflation.
    aly_rob60
    16th Oct 2015
    2:23pm
    Just keep in mind Bobeye, that the Government only guarantees savings of $250,000 per account, so that means $250,000 per taxable entity. If you have more $$$ than that, you need to spread it across accounts, but NOT with the same bank unless you have them invested in separate taxable entities (ie in your wife/partners name, in a PTY LTD name, etc).

    And if our economy does a nosedive, as is predicted by many economists, you would be better served to stick with the Big 4 banks, even though you think you are getting a better deal with your Credit Union.

    Ultimately, cash is king.
    MICK
    16th Oct 2015
    3:24pm
    Correct me if I am wrong but did I hear in the past couple of months that the bank guarantee is expiring? Cannot be certain about that though.
    Bobeye
    16th Oct 2015
    10:10pm
    My personal wealth will not effect any of the 4 Banks or the Credit Union being over 70 also leaves me free to bank where I please. With 3 low interest investment accounts plus my Savings Account I am able to keep Centerlink happy as well.

    Deeming is the only problem that makes me unhappy. I regularly complain to my Federal Member about the level of it, but it never gets a straight answer.

    Good night.
    Migrant
    16th Oct 2015
    2:50pm
    My bank recently reduced the rates it pays on pensioners retirement savings accounts by introducing a bottom tier up to $2 ,000. It claims that it is not legally bound to follow Centrelink, though it has reduced rates in the past whenever Centrelink changed, and referred to the new Centrelink rates in its letters to pensioners.
    Does any bank match the Centrelink deeming rates now, and promise to do so in the future?
    Migrant
    Rae
    16th Oct 2015
    6:22pm
    You want to hope the government doesn't change the rules again to do what has been done to defined super pensioners.

    My savings deposited after paying full marginal tax are now counted as income when I withdraw them from the fund.

    Imagine if you had to declare every withdrawal of your bank savings as income when you used it?

    It could happen now they have successfully tried it on and got away with it.
    TREBOR
    16th Oct 2015
    8:04pm
    Good point Rae. Double whammy tax is only for the peasantry - not the gentry. Never forget that.
    TREBOR
    16th Oct 2015
    7:55pm
    I've addressed this one elsewhere along these lines:-

    The problems with the banks are their excessive leveraging of property and their propensity to loan out massive sums on the basis of a 'business plan' for such things as property development a la Deputy Khalif of Auburn, in the full knowledge that a large amount of the loaned money will immediately find its way into the private company or personal hands of the principal. Alan Bond made a virtue of that kind of thing, which is why he managed to spirit away many uncounted millions.

    It seems to me that allowing a further loan on 'equity' when something in the order of 80% of the equity property is already owned by a bank, and then doing that over and over again, has not only lead to a shortage of owner occupier homes, but also to a vast number of investors who are, in reality, on shaky ground.

    Most of these have to work to sustain their mortgages, and one little push in the market, a tumble, will bring most of them to their knees. In such an event, the market would be flooded with houses for sale, and selling to cover looming disaster will be a thing of the past.

    The only people to benefit out of this lemming like rush to invest in houses are those who got in early when houses could be bought for a comparative song. The rest will go to the wall once the market or the economy collapses, as it is setting fair to do with the savage downturn in the false god 'global economy'.

    Consequently my view is that rather than punishing owner occupiers with higher mortgage rates, a reasonable rate for investment pure and simple should be the way to go. This would ease pressure on the market and allow people to buy a home to live in rather than trying to make a profit out of it.
    Dot
    16th Oct 2015
    10:49pm
    So Westpac is greedy. We were paying 18% on our mortgage 50 years ago, even though my husband what was in those days a secure job with Main Roads Department the Commonwealth wouldn't give us loan so change banks. We still live in the same house. Today people change houses like underwear, want bigger houses that cost a fortune to run. The homes are well over priced so to hell with it raise the interest rates and start living a normal life.
    Young Simmo
    17th Oct 2015
    12:52am
    Ho-Hum, wakey-wakey, where have I been? Oh yes, I discovered the Grey Nomads web site and went in and stirred the pot a little.
    Anyway this sort of stuff doesn't worry us as we are organised.
    In 2000 when we bought our first computer and joined the internet we took out a $500 limit Visa Card. Over the last 15 years we have paid it off every Pension day, and not paid a cent in interest in 15 years. When we want to use it to buy a fridge or telly ect, we just chuck an extra 1 or 2 grand in. It has been easy sailing for years and I am not skiting, just trying to give anybody the tip on how to have a worry free financial life.
    Alright I am sure somebody is going to try and shoot me down, but I can take it, Go, Go, Go..


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