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 Self funded: another kick in the guts on the way

     Ready for shafting!

01.06.19.  You get the feeling that going to work, going without many things to have a reasonably comfortable life after retirement—if you’re not too crook from manual work related injuries to enjoy it. That money in safe investment, like the banks as opposed to other ways in which you wake up one morning to find it’s all gone, but on the way out some ‘money manger’ got their cut, makes you feel impotent and frustrated against such unstoppable forces. As a self employed person, outside pension/super plans I gave single lecture at a Tafe, they withheld $150 which some useless bastard should not have done—it could not be retrieved. Some time later I got a cheque for $2:40, the note said “account now closed!” Imagine if all pensioners, self funded, etc withdrew every penny about to earn jackshit? Ha, now what was all that about the bank, “opt in or opt out” legislation—bend over, shafted again! The old saying, “money to burn” is where we are at—at least you might keep warm.
Mortgage repayments are set to become cheaper for many Australian borrowers, as lenders rush to cut their rates ahead of next Tuesday’s widely anticipated Reserve Bank decision. After keeping rates on hold for nearly three years, on Tuesday the Reserve Bank will almost certainly cut the official cash rate to a record low of 1.25 per cent.Source: ABCMortgage lenders rush to offer cheaper loans ahead of Reserve Bank interest rate cut

In fact, the odds of Australia’s central bank announcing this rate cut have risen to 92 per cent, according to Refinitiv market data.
With that in mind, several large banks — including National Australia Bank, ING and Bank of Queensland — have lowered their mortgage rates this week in an attempt to stay competitive.
About 50 lenders have already cut their fixed rates in the last two months, according to financial comparison website RateCity.
One customer-owned financial institution has cut its one-year fixed mortgage rate (for owner-occupiers paying principal and interest) to 2.99 per cent — the first institution to offer a home loan below 3 per cent.
However, a range of banks are now offering mortgages below 3.5 per cent, with one of the big four lowering its two-year fixed rate (for owner-occupiers buying their first homes) to 3.49 per cent per annum.
How much could borrowers save?
For people with a $500,000 mortgage, one RBA rate cut could lead to annual savings of more than $900 per year, according to comparison website Finder.
On its calculations, three rate cuts from Australia’s central bank could result in typical borrowers saving more than $2,600 per year:
“That said, if the RBA cuts by 25 basis points this doesn’t necessarily mean banks will pass on the rate cut in full,” said Finder’s insights manager Graham Cooke.
“If you don’t get the full rate cut, vote with your feet.
“A lower cash rate will spur even further competition within the market so it is the perfect time to weigh up your options as you have the bargaining power — the best value home loan starts with a ‘3’.”
How many rate cuts for the RBA?
Experts, however, are divided on how many times the RBA will cut rates to stimulate Australia’s lagging economy.
Last week, Westpac went as far as forecasting three rate cuts this year — with June, August and November being the most likely months.
The scourge of negative equity
Mortgage delinquencies are on the rise, house prices are still tumbling and borrowers are falling into the quicksand of negative equity in their property. It’s bad.
After three cuts, the nation’s cash rate would drop to 0.75 per cent, which would be an even lower “historic low”.
Westpac’s chief economist Bill Evans has based his prediction on a dour outlook for the Australian economy.
“We see the unemployment rate drifting up to 5.4 per cent by year’s end, economic growth at 2.2 per cent for 2019, underlying inflation at 1.4 per cent, and the housing market still weak, although approaching stability,” he said.
Westpac is also expecting the Australian dollar to drop to 66 US cents by the end of this year. At 1:33pm (AEST), the local currency was buying 69.12 US cents.
JP Morgan went even further with its bleak economic assessment.
The global investment bank expects Australia’s cash rate to fall as low as 0.5 per cent by mid-2020. The RBA would have to implement four rate cuts to reach that level.
Amongst its reasons, JP Morgan cited lower-than-expected core inflation, a higher-than-desired unemployment rate and a deterioration in the “global growth backdrop”.
Customers reluctant to borrow
While borrowers are now able to get loans at record low interest rates, this has yet to feed through to increased demand for debt.
The latest official data show home lending growth fell to 3.9 per cent over the year to April — the weakest annual growth rate since records began in 1976.
“Ahead of the election, Aussies were reluctant to borrow,” noted CommSec chief economist Craig James.
“It remains to be seen whether the proposed rate cut(s) will change the behaviour of Aussie consumers and businesses.
“But lower interest rates, tax cuts, APRA changes on mortgage serviceability, the increase in minimum wages and government assistance for first home buyers may lead to a lift in borrowing by home owners and investors.”
Australians are also shying away from credit cards, with outstanding debts falling 3.9 per cent over the year to April and the national credit card balance of $39.6 billion the lowest in eight years.

{ 2 comments… add one }
  • Bwana Neusi 01/06/2019, 11:46 am

    And with the drop in official rates comes a drop in interest paid on term deposits until we reach the logical position where a retiree is expected to return a negative percentage on a term deposit.

  • JK 01/06/2019, 11:58 am

    Ah yes always reminds me what my old mother used to say, never trust a bank, or a government, her and dad lived thru two wars and I think they learned a bit.

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