Mortgage Borrowers Display No Loyalty Towards Lenders
A leading mortgage broker has warned Australian banks not to take their mortgage borrowers for granted, with borrowers no longer showing customer loyalty to their bankers, as they seek out the best deal for their mortgage.
According to new independent research commissioned by mortgage broker Loan Market Group, first time mortgage borrowers display almost no customer loyalty, especially towards the Big Four banking groups.
“They are looking for the best deal they can get, so it doesn’t matter to them whether they have had a long-standing relationship with a particular bank or any lending institution through a savings account or other dealings.” Loan Market Group chief operating officer Dean Rushton said releasing the findings on Wednesday.
Even after securing financing with a specific lender, the study found that borrowers see themselves refinancing their mortgage several times over the lifespan of the home loan, if they felt they could obtain better terms.
The study also found that first time mortgage borrowers who now face tougher lending criteria, were actively researching the best deals on offer.
“The lending landscape provides them with a lot of options and they want to make sure they are in control and are not being talked down to,” Mr. Rushton said.
Mortgage borrowers who trade up to higher quality properties and investors, tend to display more loyalty to their bankers, but were still prepared to flip between lenders if it made financial sense.
“The lending market is more sophisticated and access to the internet has enabled buyers to be better informed about the different products and services available,” Mr. Rushton said.
Compare Australian Home Loan Deals
Australians Spent More On Credit Cards In September
Australians increased the total value of their spending on charge and credit cards including advances by 2 per cent during the month of September, data released by the Australian central bank shows.
The total value of spending by Australians on charge and credit cards during September was $19.246 billion, up from $18.869 billion in the previous month.
The value of credit card repayments increased by 3.5 per cent during the month, to $19.602 billion, according to a monthly bulletin released by the Reserve Bank of Australia on Thursday.
Total balances outstanding on charge and credit cards increased by 2.4 per cent to $45.139 billion, whilst account balances that accrued interest declined marginally to $32.435 billion for the month.
Charge and credit card purchases by value rose 1.9 per cent for the month, whilst the value of cash advances on charge and credit cards also rose by 0.7 per cent, with the actual number of advances increasing by 4.1 per cent.
By value, credit and charge card purchases increased 1.9 per cent to $18.290 billion in September, from $17.951 billion in August.
There were 14.351 million purchases using charge and credit cards in September, whilst the number of charge and credit card accounts remained flat for the month.Total credit card repayments fell by 0.3 per cent over the year.
Compare Australian Credit Card Deals
AMP Chief Says Government Should Increase Mandatory Superannuation Contributions
Craig Dunn, chief executive of Australian wealth management company AMP has raised the temperature of its bid to acquire AXA Asia Pacific Holdings (APH), by saying the market likes the prospect of a deal and wants the target to continue negotiations for a transaction.
AMP also said it would increase the value of superannuation contributions made by the company on behalf of its staff.
AMP says it intends to increase superannuation contributions from the current mandatory 9 per cent, to 12 per cent over the next half decade.
Speaking at a business conference, Mr. Dunn said that AMP thought that there was reason for Australia to start looking at a broader increase for all Australian workers.
“The Chinese save on average about 30 times more than the average Australian. It is Australia’s mandatory superannuation that has created the savings pool that we have today. While we have a very strong national retirement system there is still a question whether Australians are saving enough for a comfortable retirement.” Mr. Dunn said.
Mr. Dunn says he believes that approximately 4 million Australians do not have enough retirement savings, which is estimated to be approximately 65 per cent of pre tax annual income, during working life to fund ones retirement.
The super fund industry, which has approximately $2 trillion under management, is expected to be revamped after Jeremy Cooper, who heads up the government’s review, suggested that there was a need for funds to consolidate.
Mr. Dunn says he believes that the upward march of both AXA APH’s and AMP’s share price since the proposed deal was announced was market vindication of his plans for an $11.7 billion merger, and signified that the market believes a merger of the two firms was in the best interest of both company’s shareholders.
“We’ve been pleased with the way the AMP share price has moved up since the proposal was made,” Mr Dunn said.
Compare Australian Online Investment Accounts
NAB Makes Asian Asset Management Acquisition
Australian banking major, National Australia Bank (NAB) has bolstered its wealth management business further by agreeing to purchase for an undisclosed sum, a Hong Kong based asset management company, Calibre Asset Management.
The acquisition comes as NAB and other Australian lenders seek a foothold and expand into the fast growing Asian asset management industry.
Earlier in the year, rival ANZ acquired selected Asian assets of troubled British lender Royal Bank of Scotland, for $592 million. The Australian quoted an unnamed source as saying the NAB acquisition will cost the lender approximately $5 million.
NAB’s Hong Kong based general manager; Andrew Macintosh says the acquisition was a way for the lender to retain customers.
Mr. Macintosh says that NAB has seen a 60 per cent increase in its deposits and assets under management as investors flee to higher rated financial institutions.
NAB is one of eight AA-rated banks in the world.
Mr. Macintosh said that recently, many investors had shifted their assets from deposits into property investments in countries such as Australia, UK and Hong Kong, adding that the lender expects that investors would continue to look for more investment options going forward, including equities and managed funds.
The ability to provide asset management will give NAB clients additional options, with the lender seeking further acquisition opportunities in Asia Mr. Macintosh said.
The acquisition represents NAB’s re-entry into Asian asset management, after the lender sold its asset management business in Hong Kong and Indonesia in 2006 to AXA Asia Pacific Holdings for $575 million.
At the time NAB said it wanted to divest non core businesses in order to concentrate on building businesses in private, wholesale and small- and medium-size business banking services.
Calibre was started in 2002, and advises clients on investment strategies. It will become a unit of NAB and maintain the Calibre name.
Compare Australian Bank Account Deals
Australian Bank Bosses Earn Combined $35 Million in 2008/09
The bosses of Australia’s Big Four banking groups earned a combined $35 million in compensation during 2008.
Mike Smith CEO of ANZ was the best paid Australian banking chief in 2008/09, earning $10.9 million, whilst Westpac chief Gail Kelly, was the highest earning female Australian chief executive, taking home $10.6 million.
CBA chief, Ralph Norris took home $9.21 million, whilst NAB’s Cameron Clyne earned $5.2 million.
NAB and ANZ both released the details of their chief executive compensation plans in their annual reports, which were made public on Tuesday.
John Stewart, predecessor of NAB’s Cameron Clyne, earned $8.513 million in total compensation during 2008/09.
Mr. Clyne assumed the top job at NAB on January 1st 2009.
Despite taking a cut in salary, Mike Smith maintained his position as Australia’s best paid bank chief executive.
ANZ, which released its annual report on Monday showed Mr. Smiths total compensation for the 12 months ending September 30th valued at $10.935 million, which was down sharply from the previous year, when he was paid $12.963 million.
The Big Four banking groups are expected to charge their customers $4.5 billion in fees during 2009, despite having axed a number of charges this year, according to consumer watchdog InfoChoice.
“The irony of recent downsizing in exception fees is that customers doing the right thing receive no reward, as in most cases they would have avoided these fees anyway. Australians face a large and complex web of bank fees, with more than double the e fee categories than the UK. What’s worse, many bank customers do not even know that these charges exist, or are unaware that they apply to them.” InfoChoice CEO Shaun Cornelius said.
Australian banks charged their customers $4.8 billion in fees during 2008, according to the Reserve Bank of Australia.
Compare Australian Credit Card Deals
Macquarie Warns It May Have To Scrap Compensation Plan
Australian investment banking major, Macquarie Group, has warned that if its shareholders reject its compensation plan, it may be required to increase the cash portion of its bankers’ salaries.
Macquarie has proposed a compensation structure which would increase the proportion of its staff salaries received as equity rather than cash, so that the interest of its managers was more closely aligned with that of its shareholders.
Macquarie also scrapped its initial compensation proposal, which was to pay its top ten managers, including chief executive Nicholas Moore, using a larger number of stock options.
The investment banking group now proposes that it pay its top managers with shares that are issued after performance hurdles have been met, rather than options, after the government introduced new legislation regarding the taxation of employee stock options.
The compensation plan requires the approval of company shareholders, which Macquarie will seek at its annual general meeting, which will be held in Sydney next month.
“If the approvals sought by Macquarie are not obtained, Macquarie will need to consider other alternatives. This will likely result in higher cash payments to executives and reduced alignment with shareholders in at least the short-term. There could also be increased staff uncertainty regarding future remuneration arrangements, which may impact Macquarie’s ability to recruit and retain staff at a key time in the post economic downturn recovery.” The company said in a statement.
Macquarie had wanted to reform its compensation structure earlier in the year. But the company shelved its plans amid uncertainty over the taxation treatment of options, after the government introduced new regulations during the budget.
David Clarke, Macquarie chairman, said that performance based compensation, using company stock as currency, rather than the issuing of cash bonuses, gave more incentive to managers to create shareholder value.
“Macquarie’s approach to remuneration has been to align the interest of shareholders and staff over the short and long term. It has also been key in attracting and retaining quality staff. More specifically, Macquarie’s remuneration approach encourages staff to focus on earnings growth and return on equity over the medium and longer term while appropriately managing risk.” Mr. Clarke said.
Compare Australian Bank Account Deals
Australians May Spend Less On Christmas This Year
New research suggests that families in Australia intend to drastically scale back their Christmas spending this year, preferring instead to look for bargains in order to keep their Christmas shopping costs down.
A new survey by Westpac shows that approximately 35 per cent of Australian households say they intend to spend less this year, and plan to restrain their spending despite growing signs that the economy is rebounding.
The average planned spending on Christmas presents by Australian families this year is $317, and many say they will skip luxury gifts, choosing value for money gifts instead, Matthew Hassan, senior economist with Westpac says.
Mr. Hassan said planned Christmas spending was a “surprisingly cautious response” in light of the fact that overall consumer confidence had declined just 2.5 per cent as a result of interest rate hikes.
“The implications of this are that people will not be looking to be extravagant, they will be looking for bargains, and value for money,” he said.
Mr. Hassan said caution defined the mood across the whole nation and in particular Western Australia.
Over 41 per cent of Western Australian households, which bore the brunt of the financial crisis, say they plan to spend less on Christmas presents this year.
Mr. Hassan said that caution on the part of consumers may also be as a result of the reduction in government subsidies.
“Some of the planned reduction may reflect the boost to last year’s Christmas spending from the government’s $8.7 billion in fiscal payments. This helped drive a 4 percent jump in retail sales December 2008 over and above the normal seasonal rise.” Mr. Hassan said.
Total spending over the holiday season by Australians is expected to top $2.5 billion, according to the November Westpac-Melbourne Institute Consumer Sentiment survey.
14 per cent of households surveyed say they intend to spend more this year, whilst the vast majority, or 40 per cent say they will spend around $500, or the same as they did last year.
Mr. Hassan also said that caution on the part of the Australian consumer did not match overall consumer sentiment, and may ultimately give way to a splurge on spending as the Christmas season intensifies.
“Some of this is likely due to the fiscal boost to spending this time last year, but there may also be a regular bias towards restraint heading into Christmas that eases as the season gets under way,” he said.
Compare Australian Credit Card Deals
The Coming Australian Foreign Exchange Trading Boom
The head of a leading online foreign exchange broker says he believes that Australia is on the verge of a coming online foreign exchange trading boom, and sees tremendous potential for growth of investments in currency trading in the country.
Gary Tilkin, the chief executive of online foreign exchange broker GFT, says a new class of investors will arise from the aftermath of the financial crisis, individuals who feel that can deliver better returns than professional fund managers, some of whom were paid for returning double digit losses last year.
“We are going to promote it as a speculative investment where there is a chance for significant loss and a chance for significant gain and the more you study, the more you educate yourself and the better tools you use, the better your chances of getting into the significant profit category.” Mr. Tilkin said in an interview with The Australian.
Currency trading has been in existence in its present form since most governments abandoned the Bretton Woods agreement of fixed exchange rates during the early 70’s. However over the last decade, currency trading has taken off amongst retail investors.
Brokerage firms such as GFT have the ability to offer their brokerage clients spreads on currencies that are as tight as the spread that the world’s biggest banks trade at.
GFT has seen an increase in foreign exchange volumes of 78 per cent, between the second quarter of last year, to the second quarter of this year.
“Volatility is really what traders want or should want because it is opportunities If there isn’t volatility the markets just go sideways, and sideways without much up and down movement is not really an opportunity. It does cut both ways of course – extreme, volatile markets can be higher-risk but the other side is higher potential reward.” Mr. Tilkin said.
Compare Australian Online Trading Accounts
AXA APH Chairman Says Bid Significantly Undervalues Business
Rick Allert, chairman of AXA Asia Pacific Holdings (AXA APH) has said that the $11 billion joint acquisition attempt by AMP, and AXA SA “significantly undervalues” the company.
The bid was immediately rejected by AXA APH, and also includes a $7.7 billion component for AXA APH’s Asian operations, that parent AXA SA wishes to acquire.
Mr. Allert said in a letter to AXA APH shareholders, that the bid has been reviewed by an independent committee and was unanimously dismissed.
“Following the review, the independent board committee formally advised AMP and AXA SA that the proposal had been rejected because it was inadequate and was not in the best interests of AXA APH’s minority shareholders,” Mr. Allert said.
Mr. Allert said that company shareholders owned an “outstanding high growth asset,”, and that the bid ignored several key issues including AXA APH’s influence in Asia and its strategic position in the market.
AMP and AXA SA, in their response to the letter, both said their bid, valued at $5.24 per share, was based on the targets closing price before the acquisition attempt was announced.
“Based on AMP’s closing share price today of $6.35, AXA APH shareholders should be aware that AMP’s implied offer price is $5.68 per share,” the companies said in a joint statement.
Compare Australian Bank Account Deals
CBA Chief Refuses To Rule Out Rate Hikes Beyond Official Increases
Australian banking major, Commonwealth Bank of Australia has said it cannot rule out increasing its interest rates above an increase in official interest rates by the Reserve Bank of Australia.
Australia’s largest lender says the central bank will continue its policy of tightening monetary policy, as it rightly tries to pre-empt inflationary pressures.
The Sydney based lender says it expects the official cash rate to be 100 basis points higher by this time next year.
Ralph Norris, CBA’s chief executive, says that inflation must be contained as Australia embarked on a period to which he referred to as a potential golden age.
“I think it is fair to say that over the passage of the next 12 months, the rate will probably get back to somewhere around 4.5 per cent,” Mr Norris told reporters after the bank’s annual general meeting in Perth on Wednesday.
“Certainly, I think that it has been made very clear by the federal government and the Reserve Bank that the three per cent setting was very much an emergency setting for what was expected to be a significantly tougher environment here in Australia than it has actually panned out to be.”
Official interest rates were eased to nearly half century lows of 3 per cent in April this year, as part of the central bank’s monetary response to the global financial crisis.
The Reserve Bank of Australia (RBA) began tightening official rates in October when it undertook a 25 basis point rate hike at the start of October followed by another increase at the start of November.
The Official cash rate currently stands at 3.5 per cent.
Mr. Norris refused to rule out whether CBA would lift rates beyond any increase in official interest rates.
“I can’t rule that out and it is dependent on what the cost of funding is and that’s obviously based around cost of retail funding and also the cost of wholesale and international funding.
“There is no doubt that the cost of funding has continued to rise.”
Mr. Norris said it was critical that the central bank maintained a keen eye on inflation within the Australian economy and said: “particularly as the Australian economy looks poised to be on the verge of a golden age into the future”.