• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
Page
  1. 1
    1
  2. 2
    2
  3. 3
    3
  4. 4
    4
  5. 5
    5
  6. 6
    6
  7. 7
    7
  8. 8
    8
  9. 9
    9
  10. 10
    10
  11. 11
    11
  12. 12
    12
  13. 13
    13
  14. 14
    14
  15. 15
    15
  16. 16
    16
  17. 17
    17
  18. 18
    18
  19. 19
    19
  20. 20
    20
  21. 21
    21
  22. 22
    22
  23. 23
    23
  24. 24
    24
  25. 25
    25
  26. 26
    26
  27. 27
    27
  28. 28
    28
  29. 29
    29
  30. 30
    30
  31. 31
    31
  32. 32
    32
  33. 33
    33
  34. 34
    34
  35. 35
    35

Autralia's Retail Loan Rate Changes

Extracts from this document...

Introduction

1. INTRODUCTION Retail lending is the practice of loaning money to individuals rather than institutions (Investorglossary, 2008). Banks, credit unions, savings and loans institutions, and mortgage bankers are all examples of retail lenders. Retail lenders are used generally for lending money for mortgages, auto loans and consumer-finance loans (Investopedia, 2008). It is the first time in Australia, over a decade that commercial banks have increased their variable rates independent of a hike in official rates. With automation comes the danger of rapidly magnifying problems, as with the 2007 U.S. Mortgage Debacle, inflation contraction, etc (Rmaaustralia, 2008). A widespread shock in Australia in January when ANZ became the first bank to raise rates beyond the Reserve Bank's rises. The other banks soon followed, making dent after dent in the household budgets of millions of mortgage holders. During that period, the major banks increased their share of the lending market even though they raised their standard variable loan rates in April and July independently of the Reserve Bank of Australia, which raised its rates twice, in February and March (Theage, 2008). The banks have been warning for months that they could not absorb increased borrowing costs that have flowed through global credit markets after the U.S. subprime mortgage crisis, and have already increased some business rates (Reuters, 2008). This report is constructed to give more understandings about current issue in Australia financial market. Through many research from books, journals, newspapers, and websites, it will tell further about the reasons for Australia banks increasing retail loan rates and the impact of the issue on Australian financial market and its economy. 2. RESERVE BANK AUSRALIA (RBA) MONETARY POLICY AND CASH RATE The Reserve Bank of Australia (RBA) as Australia's central bank was established by the Reserve Bank Act of 1959 when it took over the central banking responsibilities from the Commonwealth Bank. RBA is responsible for formulating and implementing monetary policy. ...read more.

Middle

(2008). A Loan Pricing Model: The Influence of The Lender's Credit Rating. NSW: University of Western Sydney Fundsupermart, revised 2008, viewed 18 August 2008 http://www.fundsupermart.com/main/articleFiles/webarticles/2721/SG/LionGlobal-AUDchart1.gif&imgrefurl=http://www.fundsupermart.com/main/research/viewHTML.tpl%3FarticleNo%3D2721&h=430&w=581&sz=35&hl=en&start=1&um=1&usg=__R_hpULXUXPBvtIdFcKgbz2ZbQIE=&tbnid=sWBl0kVB6WR5lM:&tbnh=99&tbnw=134&prev=/images%3Fq%3Drba%2Byield%2Bcurve%2B2008%26um%3D1%26hl%3Den Hunt, B., Terry, C. (2008). Financial Institutions & Markets (5th ed.). Victoria: Thomson Investopedia revised 2008, viewed 11 August 2008, <http://www.investorglossary.com/retail-lending.htm> Johnston, E. (2008, July 28), Financial crisis dulls appetite for deals: Market Wrap. The Australian Financial Review, p.27 Kriesler, P. (1999). The Australian Economy (3rd ed.). Victoria: Allen & Unwin Lewis, P., Garnett, A., Juttner, J., Norris, K., Treadgold, M. (1998) Issues, Indicators and Ideas (2nd ed.). Sydney: Longman O'Shaughnessy, V., Dobbin, M. (2008, August 20).Subprime scorches grassroots. The Age. Rettrived from http:// Subprime scorches grassroots theage_com_au.htm Perry, M. (2008, January 9), "Australia's CommBank raises home loan rate", viewed 12 August 2008, <http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSSYD101165 20080109> RBA revised 2008, viewed 15 August 2008, <http://rba.gov.au/MediaReleases/2004/mr_04_03.html> Rollins, A. (2008, July 13), Rate rise less likely as borrowers feel the squeeze: Market Wrap. The Australian Financial Review, pp 17,23 Williams, R. (2008, August 2). Annus Horribilis. The Age. Retrieved from http://business.theage.com.au/business/annus-horribilis-20080801-3op0.html Wan, N. (2008, July 17), Home truths force lenders to diversify: Financial Services. The Australian Financial Review, p. 47 Subprime scorches grassroots Vanessa O'Shaughnessy and Marika Dobbin August 20, 2008 LOCAL governments that invested in US subprime mortgage-related assets are holding on to their diminished investments in many cases - because they have little choice. Several councils are considering legal action against Lehman Brothers, although some have ruled it out. Only one council, Wingecarribee Shire Council in the Southern Highlands of NSW, has started legal action. A spokeswoman for Lehman Brothers said it had received notification of legal action from one council. The products, known as collateralised debt obligations (CDOs), which were sold by investment banks such as Lehman Brothers, were marketed to councils across the country. But turbulent market conditions and the collapse of the low-end US mortgage market have affected the value of some CDOs. ...read more.

Conclusion

Geoffrey Garrett, chief executive of the US studies centre at the University of Sydney, says the subprime disaster has undermined the US's confidence in its own enterprising spirit - just as the dotcom collapse did eight years ago. "The big difference between subprime and dotcom is that subprime wasn't only Wall Street, it's also Main Street. It has hit America in its heartland," he says. McKeon believes the world economic order is fundamentally changing. Developing countries are more economically powerful and the once-mighty US is headed for a likely recession. "In most of my time it has been the US first, daylight second," McKeon says. "We are seeing a very awkward period of adjustment as the US identifies for itself where it now belongs, and there's lots of fallout." And what could that mean for Australia? Garrett believes the post-subprime and post-Iraq US will be more insular and more protectionist. It will be less willing to take the lead on global issues � perhaps spelling bad news for Rudd's gamble that the US will follow Australia (and Europe) in an aggressive market-based solution to climate change. Will things get better? Of course they will, McKeon says. He's just not sure when. "I have no doubt that we are simply in another downturn that will be followed by a period where there's much more confidence," he says. Some believe the market meltdown has been a good thing, in some ways. "The message has got to be that we are actually back to the market environment where volatility and risk are behaving the way they should be," says Nick Kalikajaros, the head of Credit Suisse Private Banking in Australia. "The volatility we are seeing in the equity markets, even allowing for the impact of the global credit crisis, should not be viewed as unusual. We seem to have a short memory. In the last 15 years, I'm not sure people actually respected the risks they were taking for the returns being achieved in their investment portfolios, because they didn't see the downside." ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. Accounting Revision Notes

    Divide the trial balance by 2. Search for an entry equal to the difference in the ledger accounts on the general journal. 4. Divide the trial balance difference by 9. a. Search for a transposed number in the ledger accounts e.g.

  2. Sources Of Finance

    The most appropriate source to use in this scenario to expand the private limited company into a public limited company is to use hire purchase to obtain the most expensive resources needed to make this happen some examples are more equipments and machinery needed to produce more stock or larger premises to develop the business into etc.

  1. Assignment 4: ethical issues. The community. P4 and M3

    Whistleblowers may make their allegations internally (for example, to other people within the accused organization) or externally (to regulators, law enforcement agencies, to the media or to groups concerned with the issues).

  2. A2 Business CourseWork

    Using information from DEFRA (Department for Environment, Food and Rural Affairs) Tesco found that they are responsible for 0.3% of the overall CO2 output for the UK and 2% for the food market and are responsible for roughly 20% of the retail markets greenhouse gas emissions.

  1. The purpose of this paper is to analyze the decision of pursuing an MBA ...

    present value terms, once the financing charges are met. "Khan, M.Y. (1993). Theory & Problems in Financial Management. Boston: McGraw Hill Higher Education." The profitability of project is observed herein from the economic flow measured by fixed prices (in order to avoid the impact of inflation within the project duration).

  2. In this assignment I will be explaining in detail the importance of cash flow, ...

    margin For Cadbury Schweppes in 2007 this was: 427000/ 5298000 x 100 = 8.059 =8% Net profit margin The net profit margin shows what proportion of the turnover are left after all costs, including overheads have been deducted. A figure of 8 per cent shows that out of every �1 sales revenue, 8p is left as net profit.

  1. Estimate the cost of equity appropriate for the evaluation of the incremental cash flow ...

    3.1 Without laminate technology We have calculated NPV on the basis of the current cash flow provided in appendixes of the case and information provided in case material. So we have used the data in Exhibit 8 and projected cash flow from 1980 to 1984, and we have calculated cash flow to 1989 based on our assumptions aforesaid.

  2. Using the example (simplified) bank balance sheet below show and explain why the Leverage ...

    In addition, due to the decrease of total assets, the total equity also turned into £10m In order to make the total equity equal to total assets. As we know, the formula of leverage ratio and capital ratio is: Leverage ratio= Total Equity/Total Assets *100% Capital ratio= Total Equity/Risk-adjusted assets

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work