News Corp is quietly selling NAB home loans

In Finance, things are not always what they appear to be. The point made in the recent Productivity Commission report! See this excellent piece from of The New Daily showing NAB’s connectivity and influence across the home loan industry – a classic example of vertical integration and more.

Fans of Married at First Sight and My Kitchen Rules may have noticed over the past few days that popular property website has started advertising a new product: home loans.

According to the ad, you can now go through the entire process of buying a house – from searching for properties and applying for conditional approval, to actually getting a mortgage – through the website.

This process will no doubt seem extremely convenient to many house hunters. And given the huge popularity of – it claims to have 6.45 million visitors a month – take-up is likely to be high.

But there is something consumers really need to know about it. Home Loans is not an independent initiative. Far from it. It is a deal between Rupert Murdoch’s News Corp, which owns 61.6 per cent of, and big-four bank NAB.

The first part of the deal with NAB

Last June REA Group, the company behind the website, signed what it called a “strategic mortgage broking partnership” with NAB. Only now, though, has it started widely marketing this new deal.

So what is the nature of the deal? Well, on the face of it, appears to be a mortgage broker in its own right. But that is not actually the case.

What REA Group is actually doing is piggy-backing on a mortgage broker called Choice Home Loans. In other words, while the branding may be, the actual mortgage broking firm is Choice Home Loans.

And who owns Choice Home Loans? NAB does.

The second part of the deal

Another key part of the deal is that house hunters who use can actually apply for “conditional approval” of a mortgage through the website.

Conditional approval allows you to bid for a property at auction, among other things. It must be provided by a mortgage lender. In this case, that mortgage lender is NAB.

So to re-emphasise the point – if you get conditional approval through, it will be provided by NAB.

The third part of the deal

However, getting conditional approval with NAB does not commit you to a NAB home loan.

So what happens if you do buy a house through Well, you then have to pick a lender. And here you have a choice.

First, you could choose a ‘white label’ loan. This is a loan that on the face of it looks like it is provided by

But once again appearances are deceptive. REA Group does not have a mortgage lenders’ licence. So while these loans may be branded, they are actually provided by a nationwide mortgage lender called Advantedge.

And who owns Advantedge? NAB does.

If you don’t fancy the home loan, there are other choices. First, there is a range of NAB mortgages.

And then, there is a list of mortgages from other providers – more than 30 of them, including big names like Westpac, ANZ, Commonwealth Bank, Macquarie, ING, ME, UBank – the list goes on.

Oh, and by the way, that last bank mentioned – UBank – is also owned by NAB.

REA Group assures The New Daily that its (or, to be precise, NAB’s) mortgage brokers do not spruik the, NAB or UBank loans to their customers at the expense of other loans.

But the rules around this are fairly fuzzy. The Australian Securities and Investment Commission told The New Daily that, while mortgage brokers must not mislead or misrepresent the products they are selling, they also do not have a “duty of care” to their customers.

This means there is a lot more leeway for favouring certain products.

Also, unlike financial advisers, mortgage brokers can and do take commissions from lenders. That’s why you don’t have to pay for their services.

So even if NAB/REA Group don’t sell you a NAB loan, they still get the commission.

None of this is illegal. But the depth of NAB’s involvement in the new service is not made clear on the website. And given NAB is a vested interest, consumers really need to know how deeply involved the bank is before they make one of the biggest financial decisions of their life.

The Fall Out From The Negative Gearing Expose

The FOI release, which the ABC covered yesterday, highlighted “the Coalition’s phoney defence of negative gearing and capital gains tax discounts before the last election”.

A number of economists at the time disputed the claims that winding back those two tax write-offs would “take a sledgehammer” to property prices because “a third of demand” would disappear from the market.

But as the excellent Rob Burgess has highlighted in the New Daily today, there are two consequential questions which need answering:

The two questions that need answering, is why were Mr Turnbull and Mr Morrison making such obviously false claims, and why were those claims not torn apart by the Canberra press gallery?

The answer to the first question is straightforward. They were either responding to an ideological commitment from the right-wing of their own party room that tax is somehow optional for asset-rich Australians, or they were following the advice of party strategists who could not see them re-winning government if wealthier Australians did not hear them loudly condemning Labor’s plans.

Historians will not doubt tell us which of those it was in years to come.

The answer to the second question is more complicated.

Journalists were not brazenly siding with the banks who had profited so much from the negatively-geared property investment mania, and they were not simply playing partisan politics in favour of a Liberal-led government.

Rather, the get-rich-quick culture of the then 16-year-old property boom, and the gradually normalised claim that tax avoidance is somehow a basic human right, has infected Canberra policy makers and fourth-estate critics alike.

That’s why in 2016 it was so refreshing to hear NSW planning minister Rob Stokes lay out the moral case against these tax write-offs.

He said at the time: “We should not be content to live in a society where it’s easy for one person to reduce their taxable contribution to schools, hospitals and other critical government services – through generous federal tax exemptions and the ownership of multiple properties – while a generation of working Australians find it increasingly difficult to buy one property to call home.”

While he told the truth, his federal colleagues were telling lies.

They lied on behalf of the 10 per cent of Australians who profit from the tax write-offs, and against the interests of the other 90 per cent.

Perhaps now that the nation’s best-equipped economic modellers have highlighted the benefits of these reforms – around $6 billion a year returned to the budget bottom line – the news media will finally call these laws out for what they are.

They are grossly unfair. They have helped pump up the Australian housing bubble. And they have redistributed tens of billions of dollars from poorer to wealthier Australians.

As interest rates start to rise around the world, and the interest-payment write-offs of property investors start to bite even harder into the federal budget, these laws need urgent reform.

A news media that vigorously holds the defenders of these laws to account would be a good start.

The New Banking Code Is Simply The Minimum Customers Expect

Let’s be clear, the floating of the new banking code is not bad, but is really is still setting a low bar and contains elements which most customers would already expect to see. This is not some radical new plan to improve customer experience, rather more recognition of the gap between bank behaviour and customer expectation. And it does not HAVE to be implemented by the banks anyway.

There is much more work to do. For example, how about proactive suggestions to switch to lower rate loans and better rates on deposits?  What about the preservation of branch and ATM access? What about the full disclosure of all fees relating to potential loans?  And SME’s continue to get a raw deal thanks to lending policy and bank practice (despite the hype).

Then the biggie is mortgage lending policy, where banks current underwriting standards are set to protect the bank from potential loss, rather than customers from over-committing.

That said, this piece from the New Daily discusses the code and calls out some of the changes.

The year 2017 saw the big banks introduce a slew of measures, from scrapped ATM fees to new ethical codes, all intended to boost their battered reputation and fend off a royal commission.

In the end these measures were not enough, and in late November Prime Minister Malcolm Turnbull folded to political pressure and called a royal commission.

Nevertheless many of the banks’ voluntary measures will significantly improve consumer experience.

In particular, the new Banking Code of Practice, a list of consumer-centric reforms written by the banks themselves, will make a number of changes that consumers can use to their advantage.

Currently before the Australian Securities and Investment Commission for approval, the new Code is likely to include recommendations by the Australian Banking Association (ABA) that will significantly benefit individual consumers, as well as small businesses and guarantors.

The ABA said that included in the Code are key changes aimed at making banking more accessible and increase availability to consumers, alongside higher transparency and increased standards.

We’ve picked out some of the key changes that could benefit the average Aussie punter.

1. Online cancellation of credit cards

Currently credit cards can only be cancelled by a phone call or written request, but only after the balances has been paid or transferred. Direct debits that are not cancelled may reactivate a cancelled credit card. So knowing in advance what direct debits are applicable will prevent this happening.

Consolidating all credit cards into a debt consolidation loan will be simpler if the borrower can provide evidence of credit card cancellation, facilitated by online cancellation.

2. Notification of when payment defaults are reported to credit reporting bodies

With Comprehensive Credit Report becoming compulsory for the big four banks from 1 July 2018 there will be the obligation not only to share credit data with other credit providers, but also report positive credit behaviour.

Keeping track of defaults and exhibiting future positive credit behaviour will be advantageous to borrowers when applying for future loans, by increasing their credit worthiness.

3. Notification of introductory credit card interest free period expiry

Transferring the balance of a credit card to a low interest rate credit card can be a smart way to pay down credit card debt but only if this can be done within the interest free period. After the period expires the credit card interest rate can revert to a much higher rate, leaving the borrower in a similar position prior to transferring to a low interest rate card.

4. Proactively identifying customers who may be experiencing financial difficulty

Financial hardship assistance programs offered by banks will be improved as well as a new commitment for banks to proactively work with their customers in financial difficulty to help prevent a situation worsening.

5. Consumers can request a list of direct debits and recurring payments made on credit card and bank accounts

As mentioned previously a cancelled credit card can be reactivated by direct debits that have not been cancelled. As more and more payments are made by direct debits, customers are becoming further entrenched with their bank, and closing an account or transferring to another bank can become unfeasible if there is not an easier way of knowing direct debits and other payments.

6. Improved fee disclosure and waiving or refunding of some fees

The removal of fees to bank statements for customers who do not have access to electronic statements, and improved disclosure of fees will save consumers money and improve their ability to manage their finances.

Businesses will also benefit with more notice of changes to loans, and simplified loan contracts that are more easily understood.

Small Business and Family Enterprise Ombudsman Kate Carnell said she was concerned the code cannot be properly enforced.

“The committee will not be fully independent and banks won’t be obliged to accept its recommendations,” she said.

“The code stipulates only that banks will comply with ‘reasonable’ requests of the committee. This means effectively that banks will only act on recommendations if they feel like it. If they don’t think the committee is reasonable they have an escape clause.

“It’s like the umpire is appointed by the home team and they don’t have to accept the umpire’s decision.”

At the same time Ms Carnell welcomed the code’s “simplified language” and specific focus on small businesses.

Bitcoin’s rise will have ‘disastrous’ consequences for the planet

From The New Daily.

The Bitcoin frenzy currently gripping the world is taking an unexpected toll on the planet – in the form of a carbon footprint almost as big as New Zealand’s.

And with the cryptocurrency’s astronomical growth showing no sign of slowing, this carbon footprint is likely to grow – prompting some commentators to warn of an “environmental disaster” in the making.

The culprit is Bitcoin ‘mining’, the little-understood process that both secures the existing Bitcoin system, and creates new Bitcoins.

This process, according to Digiconomist, is incredibly energy intensive, and is fed largely by China’s highly polluting, carbon-intensive coal-fired power stations.

These revelations come as the Australian Securities Exchange revealed it would be using the same technology used by Bitcoin – Blockchain – to run its system, the first stock exchange in the world to do so.

Writing in The Conversation on Monday, Professor John Quiggin said the rise of Blockchain itself should not be prevented, as there were other ways to use it that were not as energy intensive.

But he said that Bitcoin itself should be abandoned, describing it as a “collective delusion” with “massively destructive environmental consequences”.

Bitcoin’s rise continues

On Monday, the value of a single Bitcoin reached $A22,343, more than 20 times its value a year ago.

The unprecedented surge – offering massive returns on small investments – has proved irresistible to everyday investors, pushing more and more to buy the currency, and forcing its value into what many warn is bubble territory.

But a more sophisticated, select group – Bitcoin miners – is also  seemingly increasing, likewise attracted by the rocketing value of a digital currency that many called the gold of the 21st century.

How Bitcoin mining works

Bitcoin mining involves using a computer to solve a mathematical problem posed to it by the Bitcoin system.

When the computer solves this problem, it validates previous Bitcoin transactions, increasing the security of the Bitcoin system. In return for performing this service, the miner – as likely as not some teenager working from his or her bedroom in Shanghai – is rewarded in Bitcoins.

The video below attempts to explain the whole thing in simple terms (with questionable success).

As the video explains, Bitcoin mining requires a truly phenomenal amount of electricity – currently 32 terawatts a year, according to Digiconomist.

To put that in context, Australia uses 224 terawatts of electricity a year, while New Zealand uses 40, according to figures published by the US Central Intelligence Agency.

If Bitcoin were a country, it would be the 60th-biggest consumer of electricity in the world, ahead of 160 other countries. In other words, Bitcoin is becoming a significant contributor to climate change.

And the likelihood is it will get worse, for two reasons.

First, there is only a finite number of Bitcoins that can ever be mined. Currently around 17,000 have been mined. The limit is 21,000.

The closer we get to the 21,000 figure, the harder it is to mine Bitcoins. As a result the computer power required to mine Bitcoins increases, with the electricity used going up as a result.

(All this, by the way, puts a huge strain on miners’ computers.)

And second, as the value and profile of Bitcoin increases, the number of aspiring miners will also likely increase, further pushing up electricity usage.

Supporters of Bitcoin would like to see it become a global currency to rival the US dollar. But Professor Quiggins warned against this.

“Shifting the whole global financial system to Bitcoin would require at least a 200-fold increase, which in turn would entail increasing the world’s electricity use by around 500 per cent,” he said.

“With the current threat of climate change looming large globally – this constitutes an unthinkably large amount of energy consumption.”

Turnbull government announces banking royal commission in major backflip

From The New Daily.

The Turnbull government has announced it will hold a royal commission into the banking sector, in a major policy backflip.

The decision came after the big banks wrote to the government saying an inquiry was necessary to end business and economic uncertainty.

Prime Minister Malcolm Turnbull announced the royal commission in a press conference in Canberra on Thursday morning.

“The chief executives and chairman of the big four banks have written to us, asking the government to step in, end the uncertainty and ensure an orderly process that addresses the concerns,” the PM said.

“Cabinet has met this morning and has determined that the only way we can give all Australians a greater degree of assurance about the financial system is through a royal commission into misconduct in the financial services industry.”

He said the royal commission would last for 12 months, and would report to government in February 2019. It would cover not just the banks, but also fund managers, superannuation funds and insurance companies.

The decision to hold a royal commission came within hours of a letter from the big banks addressed to Treasurer Scott Morrison, in which they called for the government to launch an inquiry.

“We are writing to you as the leader’s of Australia’s major banks,” the letter read.

“In light of the latest wave of speculation about a parliamentary commission of inquiry into the banking and finance sector, we believe it is now imperative for the Australian Government to act decisively to deliver certainty to Australia’s financial services sector, our customers and the community.”

It went on: “We now ask you and your government to act to ensure a properly constituted inquiry into the financial services sector is established to put an end to the uncertainty and restore trust, respect and confidence.

The government’s bombshell announcement followed a major threat from Nationals MPs to cross the floor and back a bill that would have established a banking ‘commission of inquiry’ behind the government’s back – a move that would have significantly undermined the PM’s authority.

In his speech, Mr Turnbull said the decision to call a royal commission was based on a desire to put an end to uncertainty that was coming from this threat.

“The banks … do not believe an inquiry is necessary, but they have raised – and you may have seen their letter to us – serious concerns that the ongoing uncertainty is undermining the financial system,” he said.

“Now the speculation about an inquiry cannot go on. It’s moving into dangerous territory, with some of the proposals being put put forward have the potential seriously to damage some of our most important institutions. We have got to stop the banks and our financial services sector being used as a political football.

“It may be politically advantageous to some people to do so, but it runs the risk of putting vital economic interests at stake, and runs the risk of putting them under threat.”

He said the decision was “a regrettable but necessary action”.

How the property boom has pulled the banks into housing market risk

From The New Daily.

Experts warn the increasing dependence of Australian banks on the property boom is putting both the banking system and the wider economy at risk.

Just how important playing the property game has become for the banks was highlighted when Westpac recently released its annual results. The bank’s chief Brian Hartzer, who earned $6.7 million for the year, said lending for mortgages accounted for 62.4 per cent of the bank’s outstanding loan book of $684.9 billion.

Martin North, analyst and principal of Digital Financial Analytics, said that figure would “be closer to 70 per cent” if you add in the lending to property developers and other businesses related to the industry.

Around 20 years ago the banks typically lent almost as much to business as they did to housing, he said.

Source: APRA

The above table details the move to housing lending. However it differs slightly from the figures Westpac quoted as it is gleaned from figures the banks report to APRA rather than the way they report in their shareholders.

Nonetheless, all figures on the chart are calculated in the same way so it tells a story about the shift to mortgage lending over the past 15 years.

What it demonstrates is that the four major banks are lending a greater proportion of their loan assets to the residential property market than they were in 2002 when both owner-occupied and investment lending are added together.

Two of the big four, Westpac and NAB, have reduced their proportional exposure to home loans slightly, but when all residential property lending is added together, all have increased their relative exposures.

The ANZ has seen its home loan exposure jump from 38.7 per cent to 43.4 per cent of its exposures.

As a result, the ANZ, traditionally a business-focused bank, has seen its proportion of corporate lending decline from 33 per cent of the loan book to 26.8 per cent.

This is potentially dangerous.

Mr Hartzer warned on Monday the residential construction cycle had “peaked” with no sign that business investment was growing fast enough to take up the slack.

“It’s hard to see what will take its place,” he said.

Independent economist Saul Eslake told The New Daily the move to property lending has been in train for some time.

“Business has been pretty conservative about borrowing for investment since the last recession in the 1990s,” Mr Eslake said.

“We had a big mining investment boom but most of it was funded by equity because of the degree of risk in those mining projects. And because 80 per cent of the mining industry is foreign-owned most of the money it did borrow came from foreign banks through existing relationships.

“The projects were so big the Australian banks mostly couldn’t have funded them.”

The banks would be more exposed than in the past to the effects of a major house price fall, Mr Eslake said, although he doubted such a disastrous outcome would eventuate.

“I don’t expect that to happen although some people have been talking about it.”

A number of factors have driven the housing boom including population and income growth for the past 25 years, a huge fall in interest rates and increases in the tax advantages to property investment through negative gearing and the halving of the capital gains tax level, he said.

Australia’s property market growth comes to a halt

From The New Daily.

Sydney’s deflating house prices have dragged the property market down across the entire country, in the most conclusive sign yet that the boom is over, figures from CoreLogic have revealed.

For the month of October – traditionally a bumper month for property sales – average house prices across Australia’s capital cities posted no growth at all.

Sydney house prices fell by 0.5 per cent, bringing quarterly losses to 0.6 per cent.

Prices in Canberra and Darwin also fell (by 0.1 per cent and 1.6 per cent respectively), while Adelaide and Perth each posted zero growth.

Of the capital cities, only Melbourne, Brisbane and Hobart saw property prices increase, at 0.5 per cent, 0.2 per cent and 0.9 per cent respectively.

Perth’s flat growth was also an improvement on a long period of falling prices.

The poor results will be a disappointment to sellers who assumed a spring sale would optimise the value of their property.

CoreLogic’s head of research Tim Lawless put the low growth down, primarily, to tighter restrictions on lending.

“Lenders have tightened their servicing tests and reduced their appetite for riskier loans, including those on higher loan-to-valuation ratios or higher loan-to-income multiples,” he said.

He added that more expensive rates on interest-only loans were acting as a disincentive for property investors, particularly those that offered low rental yield.

Commenting on the NSW capital’s poor results, Mr Lawless said: “Seeing Sydney listed alongside Perth and Darwin, where dwelling values have been falling since 2014, is a significant turn of events.”

However, despite the recent depreciation, house prices in Sydney are still 7.7 per cent higher than they were a year ago.

Turning to Melbourne, Mr Lawless put the city’s continued growth down to “record-breaking migration rate”, which he said was creating “unprecedented housing demand”.

Units v Houses

In most capital cities, houses continued to see higher capital growth than units, due to overdevelopment of the latter. A notable exception to this was Sydney.

Over the year, unit values in Sydney grew by 7.9 per cent, compared to 7.7 per cent for houses.

“While Sydney is seeing a large number of new units added to the market, it seems that high levels of investment activity and strained affordability is helping to drive a better performance across this sector,” Mr Lawless.

The report found that rental yields, while they had grown 2.8 per cent over the year, were still extremely low when compared to house prices – which have on average risen 6.6 per cent over the year.

Sydney and Darwin were exceptions to this.

“If the Sydney market continues to see values slip lower while rents gradually rise, yields will repair, however a recovery in rental returns is likely to be a slow process,” Mr Lawless said.

Chinese money dries up

While CoreLogic put the flat growth down to tougher mortgage lending restrictions, a report by Credit Suisse offered a different explanation.

According to the ABC, the report found Chinese capital flows into Australia had fallen in recent months, and this was having a pronounced effect on the domestic property market.

“Over the past few months, the Sydney housing market has not only cooled down, but has arguably turned cold,” ABC quoted Credit Suisse as saying.

“Over the past year, Chinese capital flows have fallen considerably, in part reflecting the impact of stricter capital controls.

“This fall foreshadows weakness in NSW housing demand in the year ahead.”

This, Credit Suisse argued, could see the Reserve Bank forced to cut interest rates even further. Currently the cash rate sits at a record low of 1.5 per cent.

An affordable housing own goal for Scott Morrison

From The New Daily.

There was considerable shock on Friday when Treasurer Scott Morrison announced legislation that could block billions of dollars of new housing supply – bizarrely enough, in the name of ‘affordable housing’.

Property developers are aghast at Mr Morrison’s draft legislation, because although they see it as giving a small leg-up to the community housing sector, they think it will block literally billions of dollars in investment in mainstream rental dwellings.

Both measures relate to an established way of bringing together large pools of money from institutions or wealthy individuals as ‘managed investment trusts’ (MITs).

Mr Morrison’s draft law is offering MITs a 60 per cent capital gains tax discount for investing in developments run by recognised ‘community housing providers’, rather than the normal 50 per cent discount.

But at the same time the legislation bans MITs from investing in all other residential developments.

The reason that has shocked property developers is that they have been anticipating for some time that MITs would play a major role in the emerging ‘build-to-rent’ housing market.

Two types of build-to-rent

There is some confusion around the term ‘build-to-rent’ at present, because it is being used to describe two quite different kinds of housing, both of which are booming in the UK and US.

The first is a straightforward commercial proposition. A developer might build a 100-dwelling development – be it townhouses, low-rise apartments, or high-rise flats – but instead of selling off each home to speculators or owner-occupiers, it retains ownership and rents them out directly.

The second variation is similar, but involves government subsidies and the input of community housing providers, to keep rents low.

That model, being championed by the likes of shadow housing minister Doug Cameron, would connect large investors such as local super funds or overseas pension funds, with long-term investments that provide secure, good-quality rental properties to lower-income Australians.

So when you read the term ‘build-to-let’, have a look at who is using it – it could mean fancy apartments with swimming pools, gyms or other communal facilities, or just decent housing that cash-strapped people can afford.

A fatal contradiction

What’s so surprising about Mr Morrison’s two new measures, is that they appear to work against each other.

One is trying to push rents down for low-income groups squeezed out of the mainstream market, but the other looks to crimp supply in the mainstream market and thereby push rents up.

That would be a big mistake, because both kinds of new dwellings are needed as our increasingly dysfunctional capital cities look for ways to ‘retro-fit’ sprawling suburbs with higher-density housing.

For many years now I have complained that the housing market didn’t have to get to this point – negative gearing and the capital gains tax breaks that have helped push home ownership out of reach of many Australians should have been reined in years ago.

But they were not, and the market, and the economy more generally, has become dangerously unbalanced by the housing credit bubble that those tax breaks created.

If that imbalance is successfully unwound – by wages catching up to house prices – it will be a small miracle, but it will also take a long time.

In the meantime, increasing housing supply in the right areas of our capital cities is a good way to keep a lid on prices, albeit rents rather then purchase prices – though an abundance of good rental properties can lower those, too.

That is what Mr Morrison’s draft legislation is jeopardising.

Labor, as you might expect, has slammed the ban on MIT investments, which shadow treasurer Chris Bowen says “has completely ambushed the property and construction sector”.

Much rarer, is for the Treasurer to be at odds with the Property Council – the lobby group he worked for between 1989 and 1995.

But it has also been scathing of the change.

It said on Friday: “The answer to Australia’s housing problem is more supply. Build to rent has the potential to harness new investment that could deliver tens of thousands of new homes and provide a greater diversity of choice for renters.

“… the unintended consequence of the draft legislation is to completely close down the capacity for Managed Investment Trusts (MITs) to invest in build to rental accommodation. This risks stalling build-to-rent before it starts.”

Given that kind of opposition, it’s hard to see the MIT investment ban becoming law – or if it did, the government that put such a ban in place ever living it down.

The Zombie Economy and Mortgage Rates

From The New Daily.

The Reserve Bank of Australia surprised nobody when it left official interest rates on hold on Tuesday at the record low of 1.5 per cent for the 13th consecutive month.

Governor Philip Lowe said he’d done that despite the fact that there is some light appearing on the economic horizon.

“Labour markets have tightened further and above-trend growth is expected in a number of advanced economies, although uncertainties remain,” he said.

The bank has an “expectation that growth in the Australian economy will gradually pick up over the coming year”, he said.

That positive note is challenged by some, with Stephen Anthony, chief economist with Industry Super Australia, telling The New Daily that there was not real evidence that things would improve soon.

“I’d say to the bank, ‘Stop pretending you do know and issuing statements based on faith’,” he said.

“Central banks are practicing faith-based economics and the quantitative easing and rate cut policies of recent years have created zombie economies.”

You can argue the toss about the RBA’s view but the ‘zombie’ economy is creating opportunities for those wanting to borrow to buy property.

Steve Mickenbecker, director with rate watch group Canstar, said there had been some declines in interest-only interest rates for property in recent times.

“I was a little surprised to see the decline in interest-only loans because they had been increasing as APRA had told the banks it wanted to see less investment and interest-only lending,” he said.

“Most of the fall has been triggered by moves by St George/Bank of Melbourne who may have responded to seeing their lending volumes fall.”

The average interest-only investment rate has fallen 0.71 per cent to 4.93 per cent with the best deal in the market sitting at 4.14 per cent.

This is welcome news for interest-only borrowers “who have stuck it out with investor interest-only loans and, on average, copped a 40-basis point rise over the last 12 months, adding $116 per month to the cost of a $350,000 mortgage”, said Sally Tindall, Money Editor at rate watch site RateCity.

Deals for those wanting principle and interest investment loans have dropped marginally to 4.73 per cent with the best deals at around 4.09 per cent, according to Canstar.

For home buyers there has been some downward movement with average rates down 0.17 per cent to 4.73 per cent while the best deals are at a low 3.65 per cent.

Mr Mickenbecker said: “I’ve had anecdotal evidence that there are some better deals for owner-occupiers being offered for new customers but not for existing customers.”

Ms Tindall said traditional home owners have good opportunities in the current environment if they’re prepared to really shop around.

Australians opting to live in their properties and pay down their debt can nab a rate as low as 3.44 per cent.”

There are even rock bottom investment deals available.

“While there are 510 owner-occupier loans under 4 per cent, investors have just 49 to choose from,” she said.  

The RBA’s decision came ahead of Wednesday’s GDP data, which is expected to show the economy is growing marginally slower than the RBA’s most recent annualised forecast of 1.75 per cent.

Dr Anthony said the economy has effectively been “set adrift” by the “economics of faith”.

“The question is when you ride a bike more and more slowly, at what point do you fall off?”

CBA’s Potential Exposure To Foreign Jurisdictions

From The New Daily.

The Commonwealth Bank could face big penalties on top of estimates of $300-$500 million fines in Australia if international regulators are forced to act over its breaches of rules around money laundering and terrorism financing, experts say.

Foreign regulators have been far harder on banks than their Australian counterparts, levying billions of dollars in penalties in recent years.

The bank is to be investigated by regulator APRA in an unprecedented and wide-ranging review of its governance, culture and accountability structures as a result of its latest scandal.

But if the tentacles of its misdeed spread into foreign jurisdictions, then international regulators could get involved, leaving the bank open to potentially huge penalties.

“The US Federal Reserve and potentially the Securities and Exchange Commission could get involved if any transactions involved US dollars,” said independent economist Saul Eslake.

“Jurisdictions like Singapore, the UK, the EU could be involved or even China if it felt it was a sovereignty issue,” said Pat McConnell, honorary Fellow in Applied Finance at Macquarie University.

In recent years, major international finance scandals around the rigging of benchmark interests rates in UK, European, US and Japanese markets have led to massive fines totalling over $9 billion for some of the biggest names in international banking.

On these scandals “banking regulators have led the charge but they have also involved the US Department of Justice”, Mr McConnell said.

If the CBA scandal were to spill out into foreign markets the effects could be wide-ranging. As well as fines, “if the transactions involved US dollars, regulators could suspend or impose conditions on the use of CBA securities in the US market”, Mr Eslake said.

“That could make it hard to issue shares in the US or for investors to trade in Commonwealth Bank bonds.”

Brian Johnson, a banking analyst with CLSA, pointed to the danger of international repercussions for CBA in a note to investors issued this week.

“The problem is that many of these transactions identified by AUSTRAC saw funds remitted outside of Australia which could leave CBA vulnerable to fines in those domiciles where penalties for bank misbehaviour have been much bigger than in Australia,” he said.“Furthermore, bank counter parties will likely be looking at CBA exposures in the light of these alleged AML [money laundering regulation] breaches.”

That, in lay persons terms, means that other banks may cut exposures to CBA because they think it has become a business risk or charge more to do business with it. That, in turn, would affect CBA’s profits.

“With CBA having facilitated the transfer of AML breached funds to Malaysia and Hong Kong, those country’s regulators will be reviewing CBA for potential AML fines,” Mr Johnson said.

“New Zealand regulators are believed to be reviewing CBA’s intelligent deposit machines.”

Way beyond a  ‘simple coding error’

Mr Johnson said that CBA’s misdeeds go “way beyond a ‘simple coding error’” as the bank had claimed.

“The narrative in the AUSTRAC full claim (against CBA) is far more salacious, with tales of laundering drug monies, transferring funds for terrorism, ignoring recurring concerns of branch staff regarding implausible cash deposits and ignoring directives from the Australian Federal Police,” Mr Johnson said.

“While CBA is likely to go through the motions of preparing a defence to AUSTRAC’s claims it’s likely CBA would seek an out of court settlement to avoid the prolonged adverse detailed reporting that would inevitably follow court proceedings.”

Mr Johnson said he believed CBA could face Australian penalties or settlements of $300 million to $500 million, plus the risk of offshore fines.