So the RBA cut the Cash rate by 0.5 points, larger then what most expected of a 0.25 point cut. Yay.

Here is what Wayne Swan says about it:

Federal Treasurer Wayne Swan welcomed the decision as "the interest rate cut that households and small businesses have been hanging out for".

Hang on, isn't that the cash rate of overnight loans that was cut? The banks have said nothing about passing on the rate cut at all. From what I understand the average Joe like you and me are indirectly affected by a RBA rate cut, we only get a slice of the pie if the banks pass on that rate cut into mortgages and whatnot. So is the current government blowing someone else's trumpet, prematurely at that? Did they really have anything to do with it? If so was it from good money management or bad?

Taggs, your thoughts?

The governing party has no direct impact on the rates. But they can have a small effect.
You are right in thinking that RBA rates don't directly affect us either, we rely on the resellers (Banks) to also lower their rates. With a 0.5 drop though, they it would be pretty ballsy to not give at least some of that onto consumers.

Abbott was calling for them to match any drop as well, as we'll need it due to the dramatic increase of costs thanks to the carbon tax, or something LABOR BAD RAWR. Even he wasn't stupid enough to say that the banks will definitely pass on any/all of a drop though.

What a big deal out of nothing. On a $300k loan (like the one I'm in contract for right now), that's $125/month.

Maybe you could give that $125 a month to me so I can put it into my home loan and pay off my house 5 years earlier.

Fixed my loan a couple months ago, FML

It'd be exactly the same as the government telling me I wasn't allowed to make as much profit from selling lights

If you made too much profit selling lights I'd be watching out for an Illumination Resource Rent Tax.

What a big deal out of nothing. On a $300k loan (like the one I'm in contract for right now), that's $125/month.

Whatever.

What the fuck. Maybe when you start paying that loan you'll realise how awesome extra money is.

Shit, banks should even go below the reserve to be more competitive. This cost of lending excuse the banks use is BULLSHIT considering their fat profits.

I thought the banks made their fat profits off investments, account fees, credit cards and services rather than interest on home loans?

Seriously, 6.5% or whatever it is atm (and that's peaking too, mind you) is a pretty ordinary return considering the risk in a wobbly housing asset class?

But... but... banks make a ridiculous amount of money off a home loan over 25 year term. isn't it like 2x the value of the house in interest?

That's over THIRTY YEARS!

If you want to beat the bank at their own game its really, really easy. Buy a modest home with the biggest deposit you can muster and dump as much cash into it as possible, all the profits in a home loan are in the first 5-10 years.

Of course a McMansion at minimum payments is what most people actually do.

Also; Commonwealth, National and ANZ bosses must be having a difficult time phoning each other as none have released a statement re the RBA rate cut yet. last edited by Tollaz0r! at 19:06:57 01/May/12

You'd have thought they'd have their stories organised for the rate cut by now.

Because a government can't tell any private company what to do. It'd be exactly the same as the government telling me I wasn't allowed to make as much profit from selling lights, I'd tell them to cramb it up their asses

lawls I am tuff casa ... Yeah they can ...
TAX
And unlike you and your business the government underwrites the banks, if they go bust their customers are protected.
You go bust and your customers just get to cry.

Buy a modest home with the biggest deposit you can muster and dump as much cash into it as possible, all the profits in a home loan are in the first 5-10 years.

You live in Cairns yeah ? A long way out of town is what 10mins ?
Innisfail (a different town/"city") (ps. lived in Innisfail) is about the same in time as some parts of Brisbane to other bits of Brisbane (say Forest Lake to Sandgate ... in laws live in Forest Lake ... how is it even part of Brisbane ???)

I saved what I considered to be a huge deposit (~130k), and bought a pretty modest mid 60s 3 bedroom (no en suites, pools etc) with extra asbestos in an outer suburb. And I rekon I could buy 2 houses of similar quality in Innisfail for what my mortgage was (ie. without the deposit).

He is blowing that trumpet realllllllly loud. Meanwhile the previous RBA head, Fraser, is banging on about dodgy money managment from Labor.

One eyed much ?

Bernie Fraser took broad sides at both side of politics.

"To listen to the Coalition spokespeople, I hear echoes of the Republicans and the more extreme Tea Party Republicans - all this folksy nonsense about governments have to live within their means, deficits are bad, debt's bad," he said.

"All this to me is nonsense really because governments are not like households, they are not like businesses, they have responsibilities that go beyond that."

You'd have thought they'd have their stories organised for the rate cut by now.

Every day they delay is extra profit. They go in to hiding with the old "we're currently assessing our options" bullshit and all of a sudden a week or more passes 'saving' the bank millions of dollars.

Nukleuz is spot on - if the RBA instead announced an increase today, they'd have already all released their statements (effective immediately). As it is they won't pass on the full drop & any reduction will take 2~3 weeks before it gets applied typically.

It's never a two way street with banks.

Can't be interest rate though, surely.

Well they can.
Recently did a buy/sell. One of the big banks was actually the cheapest on rates and fee's etc.

Vash you seriously ought to educate yourself a bit about finance. That knowledge is worth its weight in gold.

I see this every day though. I can't believe we don't teach more in the way of finance at school. Most people are just clueless when it comes to this stuff and it's scary. And I was the same. How could I graduate from engineering and still know bugger all about the time value of money, or have a grip on the basics of how the world does its financial business (including bond, stock, forex markets, etc)?

How can people plan for their future when they can't even do a basic loan analysis?

sweet, although I'm with BOQ and they've held back 0.15% of that 0.5% which is a pretty big chunk when you think about it

plus the new rate will probably kick in in like... july

What do you think about Clive Palmer/situation, infi? :)

clive Palmer is now involved in deciding interest rates? this guy can do anything.

no guessing about it, it's completely and utterly irrelevant.

MPs (like clive will ever be one anyway) have zero practical influence on interest rates, don't know why you'd link that article.

take your obsession with trying to one-up infi to pm, it's fucking pathetic.

Some numbers floating around in my head.

The Big4 Banks make 12B every 6 months in profits. Big number is big, that's 24B per annum. My eyes kind of glaze over at that. Then I started thinking about it.

24B is 8% of the Federal Government budget. 24B is the NBN project paid for at the start of 2014.

It's over half the health budget for the nation.

It means that 2.4% of the nation's GDP is realised via the profits of the big 4 banks - a thousand dollars from every citizen, man, woman, child, pensioner, dole bludger, nursing home patient, prisoner.

I have no idea if that's healthy, but it sure seems like a lot of money? I like the fact that our banking system is nice and secure, because the bank owns my house. But is it too much?

That 24B doesn't get sucked into a black hole Hog, the majority of Australians own shares in the banks either directly, or indirectly through super funds.

My rent goes up and NEVER goes down over time. You home owners have it good.

My rent goes up and NEVER goes down over time. You home owners have it good.

It's a more complex trade-off than that.

If you buy a home through the typical way you pay a lot of interest over the term of the loan (25 years typical) - that is money that you are paying for the bank to lend you that large amount of money to purchase the home. It isn't paying off the actual house you bought.

But at least if you own it you CAN maintain it. I'm renting atm while building and if it was my place I would very quickly replace the oven (no timer, no light, shit stove, no grill), fix water damaged walls that were concealed with paint, replace light fittings that can't fit compact fluros, replace cracked light switches, change location of phone points so they're not retarded like one on the stair case - wtf, change the garden, put door stops behind doors instead of sitting a toilet roll on the ground, get a real towel rail. I'm not allowed to even 3M hook a fucking picture to the wall. I've emailed some of the problems to the real estate - no answer.
That plus I had three entries within a month; an inspection and two for smoke alarms.
I can't wait to get out.

last edited by thermite at 11:12:13 02/May/12

last edited by thermite at 11:12:39 02/May/12

rba has no influence over bank lending rates. they merely set a RRP which can be easily ignored.

best thing to do is to shop around and change banks if necessary. i left boq and went to nab a few years back.

jc as to your query re clive. swan is a bona fide idiot and clive would do an infinitely better job as member for lilley so good on him i hope he does run.

check their income statements (annual reports), all are readily publicly available as part of their statutory reporting obligations.

jc as to your query re clive. swan is a bona fide idiot and clive would do an infinitely better job as member for lilley so good on him i hope he does run.

True that. :)

Something I learnt yesterday; RBA was created in 1960 when they split the 'central bank' functionality away from Commonwealth Bank which was created as part of the Commonwealth Bank Act of 1911 introduced by the federal labor government. That explains the name...

From May 4, NAB will slice 32 basis points from its variable mortgage rate, taking it from 7.31 per cent to 6.99 per cent per annum.

...

It also will cut 32 basis points from its standard variable business loan rate and 50 basis points from its iSaver savings account, taking that rate down to 3.65 per cent a year.

From ABC News.

I like how they graciously pass on the the full 50point rate cut to their iSaver Savings account. Thinking of their customers eh?

I guess we may see Commonwealth tomorrow maybe?

I'm guessing my bank isn't going to pass on shit to me if NAB is only dropping theirs to 6.99%. Mine (Suncorp) is already at 6.6%...

Time to have a chat with the mortgage broker methinks if they're not going to come to the party.

For all those changing lenders that got a loan pre 1st July, 2011 - think about the exit fees you might need to pay.