Keven Rudd needs to apply the blow torch to banks to prevent a mortgage meltdown

The big four Australian banks have been in the sweetspot, surrounded by a strong economy and a resilient business sector and a strong real estate and under-supplied housing market, but have been copping a serve from Prime Minister Kevin Rudd in recent weeks, as struggling mortgagor homeowners haven’t been getting all the interest rate cuts from the RBA passed on to them. And rightly so says Mr Mortgage who is constantly hereing from mortgage stressed homeowners.

Basically Australian mortgage borrowers and homeowners are paying about 0.4%
more than they should be, and that's going to the Banks' record profit margins.

The Prime Minister has to step up the pressure up a notch and bring some legislation to Parliament to prevent the banks profiteering at the expense of the mortgage belt and small business.
Obviously the banks are used to having their names dragged through the dirt and bank bashing its becoming an Australian pastime. So its not having any effect.
The big four Australian banks [CBA, NAB, Westpac and ANZ] are, obscenely profitable. For example and raked in $9.5 billion in profit in just six months. And this is while there is a global recession? Australia's banks are among the world's most stable and profitable and have been for some time.
The Finance Sector Union (FSU) has urged that banks make their lending practises more responsible by suggesting that Australians' ever-increasing credit card debt is unsustainable; and that linking salaries to peddling high-debt products like mortgages does not serve customers well, especially when it’s to buy shonky and highly geared investment products such as the two tier real estate market in Queensland in the 1990’s and the recent Storm Financial collapse.
Its time for action Mr Rudd, not another verbal bashing. A viable mortgage alternative to the banks is required by all homeowners and home buyers. The current system means that second tier lenders get the customers that the big four don’t want, and this will only increase the gap in profitability between Australia’s big and small mortgage lenders.
Rick Adlam is Mr Mortgage

Mortgage Finance: what will happen to interest rates?

The Reserve Bank of Australia's dramatic 1% interest rate cut has not worked according to Mr Mortgage , even though they were followed with a joint round of rate cuts around the World, because consumers have stopped spending, and this has not helped them to restart because credit card interest has not been lowered and now investments and superannuation plunges are melting away confidence and job security.
On the housing front there are now 800,000 house-holds suffering financial [mortgage] stress, and the 0.8% rate reduction passed on by the banks will help a little, but that will not encourage new home buyers into the property market, with job prospects on the slide.
The fact is Australians are fully loaded with debt, and more debt is not the answer for their problem.
Paying down debt would be easier if credit card debt were lowered the 1% that the cash rate was discounted, but banks Worldwide have liquidity problems, so milking the poor credit card holder is an easy way out of their problem.
The answer to the question what will happen to interest rates is easy. They will fall, so expect another 0.5% reduction before Christmas. This will only solve a part of the problem. The reason that the share markets are in free fall is loss in confidence, and the reason for that is the lack of liquidity in the banking sector. Even if people can repay a loan, they may not be able to get a new one because the banks haven't got the liquidity.

No secret sauce on mortgage interest rates from Labor

Opposition Leader Kevin Rudd says he cannot guarantee interest rates will not rise under a Labor Government.
But he has promised to maintain budget surpluses and tackle capacity constraints in the economy to help the central bank keep rates down.
His comments came as Mr Rudd prepared to host a summit on housing affordability in Canberra today, amid predictions interest rates could rise following yesterday's inflation data.
Economists said the Reserve Bank of Australia is now highly likely to lift rates by a quarter percentage point as early as next month, after inflation rose to 1.2 per cent for the June quarter, well above expectations.
It would be the fifth increase since Prime Minister John Howard was re-elected, although the Government said rates are still at historically low levels.
"No government can make any promise in relation to interest rates, what you can do is make sure ... the budget policy takes as much pressure off the Reserve Bank as possible," Mr Rudd told Channel 9.
"The Reserve Bank sets rates. Governments don't set rates.
"My job is to make sure, as the alternative prime minister, that through the budget policy we pursue - which is to produce budget surpluses over the economic cycle - that we take as much pressure off the Reserve Bank as possible in order to keep interest rates as low as possible."
He said people were disappointed in Mr Howard because the prime minister had pledged before the last election to keep interest rates low, yet they had risen four times since.
Mr Rudd said he had no silver bullet solutions to the housing affordability crisis, but would consider tax breaks for first-home buyers to help them get into the market.
He warned political leaders had "a real challenge on our hands" to ensure Australians had access to affordable housing.
"If you go back 10 years, the average cost of a house was something like four times that of the average annual wage; today, 10 years later, it is seven times the value of an average annual wage," Mr Rudd said.
"People are particularly concerned about first home buyers.
"One of the proposals we've got on the table today is 'how do we help first-home buyers get into the market' in terms of encouraging them with first-home buyer deposit schemes which could be treated in a concessional way by the taxation system."
State housing ministers will join Mr Rudd and housing industry stakeholders today in nutting out the issues.
Opposition treasury spokesman Wayne Swan said the Federal Government's failure to invest in education and tackle skills shortages in the economy were partly to blame for the rise in inflation.
"This government has been complacent when it comes to the main drivers of productivity in the economy, and there's no doubt in the longer term that's put upward pressure on inflation and upward pressure on interest rates," said ABC Radio.
"We should have invested more in the training and the education of our people - that is one significant factor here."
Mr Swan said the housing affordability crisis was rapidly becoming an economic problem as some workers could not afford to live near job opportunities.
But he rejected suggestions buyers were being too picky.
"Some people may have unrealistic expectations or be aiming too high, but I think the great bulk of people are now struggling just to put a very basic roof over their heads," he said.
Source: AAP