How are you feeling about the banks?

Last Tuesday, while I wasn’t watching the Melbourne Cup, the Reserve Bank announced an increase in the official interest rates. You may have heard about it. Many people were displeased. Shadow treasurer, Joe Hockey, who had been a virtual political pariah just a week earlier when he attacked the banks for the super-profits, suddenly found himself the subject of vigorous agreement from both sides of politics who scrambled to agree that yes indeed, this profit nonsense seemed to be rather out of control. Enquiries were demanded. Outrage poured onto talkback radio.

Well, it’s a week later and there are still many people who are majorly pissed at the interest rate hike – not so much by the Reserve Bank but by the Commonwealth bank who almost doubled the rate of the RBA’s increase. No doubt many other banks are poised to follow suit.

There are 2 million mortgage holders in Australia which doesn’t mean there are 19 million people without mortgages because that 2 million doesn’t include the other members of the household. Clearly, many millions of Australians are affected every time the interest rate changes.  I know my parameters, and I know that writing about interest rate rises is not my forte but writer Bern Morley, hell she can write about anything.  And here, she writes about how she feels about interest rates and bank super-profites:

“I remember buying our first home and being absolutely scared shitless, (Yes, that’s right, so scared I couldn’t even poo) because we had to borrow, and wait for it, $143,000.  I also remember being stressed out of my mind because we had bought a house that was $2,000 over our limit.  That’s right folks, our limit was $150,000 and we went to $152,000.  Oh Em Gee.

To be honest, I’m not even sure what the interest rates were back in the year 2000 and I certainly wasn’t aware that the reserve bank met each month on a Tuesday and messed with our lives.  Was I just oblivious or was it the fact that information wasn’t quite as readily available as it is today?

Phil’s dad was horrified when he heard we were going to borrow that kind of dosh.  Couldn’t we just save up and buy it outright he asked?  Um, let me think about it.  No we can’t because

a) Unless we won the lottery, robbed a bank or (nudge, nudge wink wink) were left an inheritance it was impossible and

b) even if we could save up $140 odd thousand, by the time we did that, the house would have tripled in value and we’d be worse off than had we just jumped into the abyss in the first place.

The fact of the matter was, the banks had us over a barrel and if we ever wanted to get close to living the ‘Great Australian Dream’, we’d have to beg them for the cashola upfront.  Thing is, ‘The Great Australian Dream’ has changed since our parents were tackers.  Back then it was all about having a 3 bedroom, 1 bathroom, and single story house sporting a sizeable back yard with enough bindy patches to take down a fully grown man and mandatory Hills Hoist to whirl both washing and kids around on.  The really well off people had an in ground pool.   Those of us who weren’t, spent our summer days in their pools anyway.

Nowadays the great Australian Dream comes attached with an average mortgage that once upon a time would have made us millionaires, and at the mercy of lending institutions at large.

Yesterday, when they thought the nation would be too pissed to notice, the Commonwealth bank jacked up interest rates to nearly twice that of the Reserve Banks.  Basically they gave its customers the giant middle finger.  This, hot on the heels of its rival, Westpac declaring a 6.3 BILLION dollar profit. Not bad hey.

Who wins when the banks make profits?  The shareholders and the fat cats at the top.  Oh, and those on trail commissions.  Of course those with Super Funds that have investments in banks and the self-funded retirees do a happy dance every time the rates go up but does the young myopic guy behind the counter copping everyone’s vitriol get a fair chunk of any of this?  Nope.  The best he can hope for is a holdup-free day.

And of course there are those out there who would argue that if you can’t afford a few rate rises, perhaps you shouldn’t have the loan in the first place.    I doubt it’s the rate rises that have gotten them in the shit.  Perhaps it’s because a father has had to spend the last 2 months at his daughters bedside after she contracted meningococcal and therefore, hasn’t worked.  Or perhaps their car has unexpectedly shat itself.  Maybe someone’s wife got cancer and the insurance won’t pay out.  Who knows?  Circumstances have led them to the point where they can’t afford the mortgage and no one has the right to judge why they are there.

I kind of got to wondering about the Reserve Bank.  We hear the term every month but what are they there for?  And if they can lend our banks money and set the rates, why can’t we just borrow directly from them?  I know this is naive.  I know I sound like Pauline Hanson, (who by the way, I believe is a fully fledged fruitloop) that time when she asked why we just can’t print more money, but it’s just something I’d like an answer to.

Here are the obligations of the Reserve Bank, per their very own website,

‘It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank … are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:

a.    the stability of the currency of Australia;

b.    the maintenance of full employment in Australia; and

c.    the economic prosperity and welfare of the people of Australia.’

So there you have it.  That’s their deal. Are they sticking to it?  Do they have a choice? You need to ask a much smarter person than I, but jacking up interest rates right before our biggest retail period of the year certainly does nothing for employment or internal economic spending as far as I can tell.  And employment, well ask any business owner or construction worker on the street and I guarantee you that there are many concerns about long term prospects.

I guess the only way to make a point with the banks is talk with our feet.  You’d be surprised how much as a collective group, we all mean to them.

Ironically enough, we now live in a house that although in a top location, is smaller than the one we started with. That either makes us shithouse with our money or simply just a family living in 2010.

So what’s YOUR view? Pissed with the banks? Or are you a shareholder and delighted that they’re trying to maximise profits? Tried to change banks lately? How did that go? And what factors affect your decisions on where to bank or who to borrow money from?