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Major raises fixed rate: Is this the beginning of the end for record lows?

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Australian Broker | 09 Jul 2013, 08:00 AM Agree 0
One major lender has bucked the trend and increased its three-year fixed rate - is this a one off, or a sign of things to come?
  • Casey | 09 Jul 2013, 09:07 AM Agree 0
    Hmmm... Increased funding costs and lower credit demand. It's been some time since I did an economics unit so I might be wrong. But these would appear to be two opposing forces, that in an open market would generally cause prices to recede due to lack of demand. I may have over simplified this, but curious to know the factors increasing costs?
  • Broker | 09 Jul 2013, 09:27 AM Agree 0
    Low demand, increased costs of funds ,yet continued record profit results , what a truly unique business model our banks enjoy....
  • Broker Tony | 09 Jul 2013, 09:33 AM Agree 0
    ANZ have form when it comes to playing with fixed rates. They did exactly the same thing a few months back raising their 3 year fixed rates I think by about .4% when all the others were heading down. A month or so later they dropped them back again. If I was cynical I would wonder how many 3 year fixed rate loans were in the system with no rate lock? It may also be a message to brokers to take rate lock and pay the fees regardless of the outlook for rates generally!
  • Patrick McMenamin | 09 Jul 2013, 11:09 AM Agree 0
    Gail notes that funding costs have recently been the lowest in 3 years, but I note that not a cent has been passed on outside RBA changes. When cost were purportedly rising (a view disputed at the time) less than full RBA cuts were passed on. Recent reversal of falls in funding costs which have not been passed on is not an increase Gail, it is just your margin going back to that which produced enormous profits in recent years despite poor demand for credit. We desperately need more competition to slow the gouging by these juggernaughts.
  • G H Financial | 09 Jul 2013, 11:32 AM Agree 0
    The factors increasing costs might sometimes be the need to generate a higher yield from a reducing market also.

    The basic principles of economics have been surpassed a long time ago and in large we now live in a consumer driven market that is hinged on volume and not always considerate towards the true cost of business.

    When volumes start to drop then the cost of business starts to have an impact on decisions. The need to maintain high profits year on year also plays a part in the banks decision, this coupled with the fact that in large competition inside the banking sector is mostly limited to consumer choice that still sits with most people choosing to bank and mortgage goods with the big 4 banks.

    The final consideration has been the abolishment of penalties by the Labour government, the thinking here was that this would enable consumers more choice and better deals but all it did was close out a large number of credit unions and non bank lenders that could rely on their strong book to offer better deals. Giving consumers the choice to move and the reduction in exit fees that in large was attributed to the loss that the non-bank lender would naturally incur due to cost of funds means that they now have to factor this in their margin. The additional cost of funding or margin cost means they can no longer appear to be as competitive because they now need to factor client paying out their facilities.
  • MCC | 09 Jul 2013, 02:14 PM Agree 0
    Casey you are correct in asking that question but I think it still hinges more on the back of where 'bond yields' are at present & there is no doubt there has been a recent upward movement across the board in bond yields. ANZ were just quick to seize on that & make the move but that market may still remain volatile so perhaps others are just watching to see whether there is a more substantial trend.
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