It’s been another tough week for banks, with the Commonwealth forced to despatch their CEO after amazing allegations that drug gangs were using their ATMs to launder cash.
But don’t feel sorry for the big boys.
Consumer watchdog Rod Sims of the ACCC is looking at the amazing coincidence of how the big bank oligopoly move interest rates at the same time.
Although owner-occupiers with principal-and-interest loans have fared well since the budget, borrowers with interest-only loans and investor mortgage customers have been pummelled with several rate rises.
The banks blame Australian Prudential Regulation Authority’s requirement that lenders limit the number of investor and interest-only loans they sell. But Rod doesn’t sound convinced.
“In looking at past rate rises we will be able to tell to what extent they are looking at other competitors and whether they are just looking at their big bank competitors or whether they are looking at the small banks as well, whether the Reserve Bank and other outside factors affect the way they set rates,” he told the Financial Review.
When asked whether he found it unusual that the major banks tended to move in lock-step when they adjusted the interest rates on mortgages, Mr Sims said: “Yes, it is a surprise. You have four big broadband suppliers and they don’t all move their prices at the same time,” Mr Sims said. “Some oligopolies move all together at the same time, some don’t,” he added, pointing to the supermarket chains’ race to follows Coles on $1-a-litre milk.
Meanwhile the most downtrodden people around today are savers. Interest rates paid by banks on term deposits are at record lows.
If you have savings, check whether your bank is paying you a competitive rate on your money.
Figures from the Reserve Bank show the average interest rate on both three-month and six-month term deposits has dropped below 2 per cent for the first time in recent months, the lowest level in 35 years.
This all gets far less attention than what the banks are doing with home loan interest rates, even though it affects many more people.
However, it’s an unfortunate fact of life for savers such as retirees that many term deposit interest rates being advertised today will leave customers going backwards after inflation and tax are taken into account.
So, why are the banks still cutting deposit rates, and what can customers do to limit the damage? The most likely reason banks are trimming these rates is pretty simple: because they can.
Paying savers less is also a way of widening bank profit margins, without attracting as much negative publicity as increasing mortgage rates.
A new survey of attitudes to robot financial advisers has found that we really don’t mind machines managing our money.
The global survey, which includes 900 Australians, found 56 per cent took financial advice.
The online survey, conducted in January and February, showed that 53 per cent believe that robo-advisers can “completely” or “to some extent” replace financial advisers at their local bank, insurance company or broker.
The top reasons cited? Robo-advice is not influenced by human emotions, people needing financial advice would be able to make decisions and check performances at any time of the day, and the charges would be lower.
Looks like we humans have no chance!