RBA ups rates, CBA comes within a whisker on doubling them

Wayne Swan would be fuming tonight. The Reserve Bank of Australia has put up the official cash rate another 25 basis points, only for the Commonwealth Bank of Australia to up rates 45 basis points.

The 25 basis point rise to 4.75% will come as another blow to home owners struggling with crippling mortgage debt.

With household debt quadrupling in the past 25 years on the back of surging house prices, data from the Australian National Accounts shows the pressure mortgage owners are under. In June 2010, households were forking out 75% more for interest payments on dwellings as a percentage of their net household income, than in 1989 when the bank standard mortgage rate hit 17%.


  1. What’s the saying? If you throw a frog into boiling water, he will jump out, but if you increase the heat of the water slowly, he will get accustomed to the increasing heat and eventually get cooked.

  2. Very pleased with this news,

    Can only hope that the other 3 banks follow suit and also jack up rates, the papers toady are flooded with angry comments from the over leverged cry-baby mortgage holders or seem to think they set the country’s financial rates.

    They ignored the RBA’s repeated warnings about rises. Anyway I look forward to rates hitting double digits, then ist’s time to start really saving & banking your funds.

    If realestate was a bad investment before its an absolute stinker now, but, I figure the masses will continue to believe otherwise.

  3. It’s all about to get very interesting now – I can guarantee that the extra $88 a month for those people just keeping above the bread-line with $300,000 mortgages is going to be hard to find. Has there ever been an economist that has determined that increasing interest rates actually puts pressure on inflation (as people demand more wages to be able to keep the roof over their heads) and thus it turns into a vicious cycle?

    I was very interested to hear this morning on the TV that Michael Pascoe believes that private sector investment will more then outweigh the government stimulus. If you take mining out of the picture (because China is already over-built as we speak) then the rest of the Australian economy is quite shaky. I know many small business operators on the eastern seaboard will tell you that sales have been declining over the course of this year as the stimulus money has washed off.

    The reserve bank must have a crystal ball most of us don’t , because I just can’t see how the economy is going to boom.

  4. Having lived in the UK for 10 years and seeing whats happening with the big banks dominating Australia with their super profits and bonuses, it seems like groundhog day. The UK will be paying for it for the next 30 years.

    An era of austerity is unfortunately on its way. The IMF have warned Australia, but ‘things are different in Australia – there are no problems’.
    I saw an article in the Sydney Morning Herald saying ‘increase in interest rates will boost the property market’ – honestly what a joke.

  5. There is a number of issues people need to consider before they become emotional.

    (1) It is important for a country to have a strong financial sector. As can be seen by what is occuring in the USA, once the banks go broke, society suffers.
    (2) Many Australians have some part of their superannuation linked to the local banks. If the banks do well, so does their super. But nobody is either willing to acknowledge that or link its performance to the banks performance.
    (3) The banks are not at fault. It is succesive Australian governments (and the ACCC) which have created the current climate where four banking organisations dominate the local scene. The banks are only doing what we would all do in similar circumstances – taking advantage.

    I blame the ACCC for being a useless organisation. How they allow the big banks to take over the small banks is beyond me. Whenever a new bank provides a real alternative and starts to make a presence in the market, one of the big four take them over and absorb them. How the ACCC allows this to occur is beyond me. How is the consumer being protected by allowing these aquisitions to occur and competition being effectively stiffled.

    As everything, a happy medium needs to be found between the two extremes of the Australian and US models. But this will not occur until the ACCC gets overhauled and grows some balls.

  6. FHB,

    I saw that same article, but remember the quality of fools who often write these real estate fairytales.


    Most Australians are totally ignorant, it is impossible to discuss these interest rate rises on a technical level with them, the tall poppy syndrome that inflicts this country like a virus ensures that any company that does too well gets slammed by the majority of tax payers out there. I gave up trying to explain to people at work that the real ROI of Westpac was not this mega 82% increase the media are banding around, but actually around 16%, everyone is obsessed with bringing back regulation and all the other blah blah blah they could think of.

    For those who were not around or don’t remember what it was like in this country when the system was regulated, interest rates for home loans were fixed at 13% and you had to have a 30% deposit…… in other words, 99% of the clowns out there calling for regulation would never be able to get a home loan, these fools would in effect be cutting their own throats.

    As far as a lack of competition in the banking sector goes, checkout this :


    So there, I estimate more than 30 banks all up and that does not include credit unions or building societies, so again the Australian real estate obsessed fools do not know what they are talking about. What is it about real estate that dumbs most people down?

  7. Real estate dumbs people down because they make emotional decisions about it, as opposed to rational decisions.

    No rational ‘investor’ would actually purchase an investment property now because the yields simply do not justify it.

    Also, without wanting to be undiplomatic – a lot of the people that have made easy money off property are people that ‘just got lucky’ by purchasing before the year 2000, as opposed to anyone with any real intellect..

    The two people my age I know that actually are paying off a mortgage probably have the lowest IQ out of all of my circle of friends – if that says anything…

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