Here at the Wrap, we’re determined not to dwell too much on the Royal Commission into Banks.
So when Your Life Choices, an excellent newsletter for the retired or about-to-be retired, published a story suggesting another bank was in trouble, our interest was naturally piqued.
“Are cracks appearing in the ‘Bank of Mum and Dad?’ Asked Janelle Ward this week.
Apparently, a Melbourne mother has taken the unusual step of suing her son over unpaid loan fees. And lawyers say is becoming common.
“Five years ago, you’d get maybe one (court action) a year,” David MacKensie, co chair of the Law Institute of Victoria told Domain.com.au. “This year, I would have handled at least three or four – and we’re only in March.
“The terrible thing about these things is if mum and dad are getting on and are near the retirement phase, they will effectively be putting money out of their pension pool into this property. The idea that could be at risk and affect the parents later on is also a pretty horrifying prospect.”
Time for another Royal Commission!
Insurance for the uninsurable – now that’s a brilliant idea
Talking of the Royal Commission. This week’s hearing is setting a brisk pace.
The highlights: The Commonwealth Bank sold Credit Card Plus insurance to customers who couldn’t possible have availed themselves of its security.
It was designed to help if they fell on hard times. Some 64,000 customers had been sold insurance policies while unemployed, rendering them ineligible to make a claim. One month later the bank would write to ASIC saying that only 27,800 customers were affected.
The ANZ’s general manager of home loans, William Ranken, admitted the bank only considred income when assessing customers for home loans. They didn’t care about expenses.
And Irene Savidis, an angry customer of the Commonwealth Bank, appeared to explain how she was sold insurance of her income…even though she was unemployed.
Gotta love those bank salesmen.
The painful rise of interest rates
Peter Costello is a revered former treasurer. So when he speaks, many listen.
His view this week: Rising interest rates are on the cards, and will have “painful” consequences for the housing market and Australia’s highly indebted households.
Australia’s cash rate is now 1.5 per cent, but was 7.5 per cent a decade ago. But now the US Federal Reserve has started to normalise interest rates – and that means the pressure is upward.
“If money is more expensive, asset prices must fall. Not all prices in every situation but overall they must fall,” the Australian reported Mr Costello telling the Urban Development Institute of Australia conference.
“It’s going to be slow and it could be painful and the question is will it be a hard landing or a soft landing but it’s going to be a landing.”
Rapidly-rising interest rates in the US and increasing global funding costs are putting pressure on Australian banks.
Suncorp Bank this week said it would be hitting owner-occupier borrowers with a five basis point increase, which would leave them with a standard variable rate of 5.6 per cent.
Investors will face an eight basis point hike to standard variable loans, taking the rate to 6.07 per cent. Borrowers with interest-only loans will be slugged a 12 basis point hike, leaving owner-occupiers with a 5.77 per cent rate and investors with a 6.49 per cent rate.
“Funding costs have been steadily rising since the end of October,” Suncorp Bank boss David Carter said. “This has been driven by the outlook for US interest rates, as well as domestic factors.”
Meanwhile, hosue prices are moving downward.
They are Subdued in Sydney – with house (as opposed to apartment) prices falling up to 4%, according to Moody’s Analytics using Corelogic’ Hedonic Home Value Index.