Longstanding Gold Coast and Canberra developer <a href="https://www.apartments.com.au/developers/morris-property-group">Morris Property Group</a> is continuing to roll on with its Glitter Strip apartment pipeline, seeking to return to Mermaid Beach with a new 68-apartment development.

Morris, founded by Barry Morris in 1978 and one of the Gold Coast’s most prolific apartment developers over the past two decades, has filed plans for a 12-storey mixed-use building at <a href="https://www.apartments.com.au/new-apartments/36-seabeach-avenue-mermaid-beach-qld-4218">34-36 Seabeach Avenue</a>, on the prized eastern side of the Gold Coast Highway.

The 1,227 sqm site occupies a prominent corner position at Seabeach Avenue and the Gold Coast Highway, opposite the Mermaid Plaza retail and office precinct and around 140 metres walking distance from the future Mermaid Beach South light rail station.

<a href="https://www.apartments.com.au/architects/fraser-partners-0">Fraser &amp; Partners</a> has designed the project, which will comprise 68 apartments across a mix of 48 two-bedroom and 20 three-bedroom residences.

The building will rise 12 storeys, reaching a maximum height of 36 metres, with the apartments accounting for a total of 156 bedrooms. The development application also seeks approval for short-term accommodation across the 68 apartments, while two office tenancies are proposed at ground level.

The plans show 108 car spaces across the development, with parking accommodated at ground level and within a three-level basement accessed from Seabeach Avenue.

<img alt="Seabeach Avenue and the Gold Coast Highway" data-entity-type="file" data-entity-uuid="c2175c99-12fd-4a3c-9be1-89bbf258a90d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-20%20at%202.59.41%E2%80%AFPM_0.png?VersionId=iNLzWcE6gaAE76rafhEXfHve.4g4Se0p" />

Resident amenity will be concentrated on level two, where Fraser &amp; Partners has designed a recreation deck with a swimming pool, 90 sqm pool terrace, outdoor barbecue area and gym.

The broader communal offering will also incorporate landscaped spaces, with the planning documents noting the amenity has been designed to provide areas for recreation, social interaction and outdoor living.

The proposal would continue the transformation of the Gold Coast Highway corridor through Mermaid Beach ahead of the arrival of the light rail.

The site is zoned Neighbourhood Centre and sits within the Mermaid Beach/Broadbeach Light Rail Corridor neighbourhood plan. While the prescribed building height is 24 metres, the site is identified within an Urban Neighbourhood context providing for a 50 per cent height uplift to 36 metres.

Planning documents describe the stretch of the Gold Coast Highway between Broadbeach and Nobby Beach as increasingly characterised by medium and high-rise development, with the proposed Morris tower joining projects including Ventura, The Alfred, Oceans and Otto.

<img alt="Seabeach Avenue and the Gold Coast Highway" data-entity-type="file" data-entity-uuid="911f193f-e381-4a55-be08-58be87fcf978" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-20%20at%202.59.48%E2%80%AFPM.png?VersionId=oxVvLJaY.SOXEdXrIcogfyEXDfvCmmpM" />

The development would mark Morris Property Group's latest investment in Mermaid Beach, where it has already delivered two apartment projects.

Otto, at 1 Bondi Avenue on the western side of the Gold Coast Highway, comprises 70 apartments across nine storeys. The project was completed in 2019 and includes a residents' gym, recreation deck and swimming pool.

Morris also developed Oceans at 46 Ocean Street, a nine-storey, 70-apartment build-to-rent development completed in 2019. Oceans was the group's first build-to-rent project and incorporates commercial space at ground level.

The two existing Morris projects sit further north along the same Gold Coast Highway corridor as the proposed Seabeach Avenue development. Fraser &amp; Partners' planning analysis specifically identifies both Otto and Oceans among the established built-form precedents surrounding the site.

<img alt="Seabeach Avenue and the Gold Coast Highway" data-entity-type="file" data-entity-uuid="14925119-7b71-4812-8149-340317512c7c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-20%20at%203.00.15%E2%80%AFPM.png?VersionId=aEJqYuw_nTCjcin17BSD0piB1EFotTlj" />

Mermaid Beach represents only part of Morris' considerable Gold Coast footprint.

The family-owned developer has been particularly active in neighbouring Broadbeach, delivering projects including Sierra Grand, Eclipse, Synergy, Qube, Koko, Opus and Malo, while its current pipeline includes Maison and the two-tower Crest development.

Further south, Morris has also developed a string of projects in Burleigh Heads, including Element, Boardwalk and Sandbar, while Essentia expanded its footprint north into Surfers Paradise.

The Seabeach Avenue application has been lodged by PMM Broadbeach Pty Ltd and seeks a development permit for a Material Change of Use for multiple dwellings, short-term accommodation and office uses. Zone Planning Group prepared the planning application, with Fraser &amp; Partners commissioned as architect.

The project comes as the developer continues to expand its Gold Coast pipeline while retaining a significant presence in Canberra. Morris now has more than $2.5 billion of development in its national pipeline and has delivered more than 7,000 homes during its near five-decade history

Joel Robinson

First look: Morris Property Group returns to Mermaid Beach with new Seabeach Avenue apartment development

<a data-saferedirecturl="https://www.google.com/url?q=https://www.apartments.com.au/developers/fortis&amp;source=gmail&amp;ust=1787272340808000&amp;usg=AOvVaw3hvFB2uWTRfEyEcpTSnnK9" href="https://www.apartments.com.au/developers/fortis" target="_blank">Fortis</a>&nbsp;is continuing its stronghold on Sydn​ey’s eastern suburbs apartment market, launching&nbsp;in September&nbsp;its latest boutique&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://www.apartments.com.au/developments/double-bay-nsw-2028&amp;source=gmail&amp;ust=1787272340808000&amp;usg=AOvVaw0GI5S9-wNeiLUnM-d1uYkw" href="https://www.apartments.com.au/developments/double-bay-nsw-2028" target="_blank">Double Bay</a>&nbsp;development,&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://www.apartments.com.au/new-apartments/55-william-double-bay-55-william-street-double-bay-nsw-2028&amp;source=gmail&amp;ust=1787272340808000&amp;usg=AOvVaw2YNouJQcFjiTTgVHbgDLA-" href="https://www.apartments.com.au/new-apartments/55-william-double-bay-55-william-street-double-bay-nsw-2028" target="_blank">55 William</a>.

55 William presents&nbsp;just eight north-facing&nbsp;two-bedroom, three-bedroom and full-floor&nbsp;residences to the market, priced from $4.5 million.

The upcoming launch comes just weeks after Fortis secured approval for the $80 million development, its third eastern suburbs approval in two months. Construction is already underway, with completion targeted for 2028.

[smartcode_project:default project_id=152579 project_image_fid=376250]

55 William adds to a growing concentration of Fortis projects in and around Double Bay, a market the developer has become increasingly active in over recent years.

Fortis previously completed the nine-residence Marmont on New South Head Road, while it is currently developing a mixed-use residential and retail project at 12 Cross Street. Its wider Double Bay footprint also extends into commercial and retail development.

The developer's broader Sydney residential pipeline is particularly concentrated across the eastern suburbs, with projects spanning Doub​le Bay, Ro​se Bay, Wo​ollahra, Dar​ling Point, Poi​nt Piper and Eli​zabeth Bay.

[smartcode_project:default project_id=152579 project_image_fid=376253]

At 55 William, Fortis has again turned to MHN Design Union, the architecture practice behind several of its eastern suburbs projects, while London-based 1508 London has been appointed to handle the interiors and Wyer &amp; Co the landscaping.

The six-level building will comprise a combination of two and three-bedroom apartments, including a garden residence, full-floor apartments, a sub-penthouse and penthouse. Each residence will have secure basement parking and private outdoor space.

A rooftop terrace for all residents, along with select apartments, enjoys views across Double Bay Harbour and toward the Sydney skyline.

Ceiling heights will reach up to three metres&nbsp;in select residences, while the kitchens will feature natural stone and integrated Gaggenau appliances.

&nbsp;

&nbsp;

The boutique nature of the project reflects the type of stock Fortis has increasingly targeted across Sydney's eastern suburbs, where larger apartments and smaller buildings are being pitched primarily toward local owner-occupiers and downsizers.

Fortis Group General Manager Ed Eve said the developer continues to see demand from buyers wanting to remain in the eastern suburbs but move into newer, lower-maintenance housing.

“We're seeing continued demand from local owner-occupiers and downsizers looking for high-quality homes that allow them to remain in the eastern suburbs, close to the lifestyle and community they know,” Eve said.

55 William is also one of the early projects to respond directly to the NSW Government's Low and Mid-Rise Housing reforms. Fortis had previously secured approval for just two townhouses on the 599 sqm site before revising the scheme to eight apartments following the planning changes.

Situated one street back from Double Bay's water's edge, the project enjoys an enviable harbourside setting within walking distance of Double Bay Village and the ferry wharf.

[smartcode_project:default project_id=152579 project_image_fid=376252]

Fortis has increasingly made the eastern suburbs a major focus of its Sydney pipeline. Beyond Double Bay, it recently completed the 14-residence Piper in Point Piper and has projects underway or planned across Rose Bay, Woollahra and Darling Point.

The developer recently secured approval for Verano in Rose Bay, a six-level development comprising 21 two, three and four-bedroom apartments, also designed by MHNDU.

55 William&nbsp;is soon to be release to the market with VIP appointments commencing early September,&nbsp;with residences priced from $4.5 million.

[smartcode_project_cta:default project_id=152579]

Fortis continues eastern suburbs push with 55 William launch

UAE-based developer Arada has unveiled plans for a $2 billion twin-tower apartment development in Broadbeach, marking its first move into Queensland as it continues its rapid expansion across Australia.

Arada will develop 952 apartments across two towers on a prominent site opposite the Gold Coast Convention and Exhibition Centre, with the project targeted for completion ahead of the Brisbane 2032 Olympic and Paralympic Games.

The project represents Arada's largest commitment to the Australian market since arriving in the country in 2024 and significantly expands a local pipeline that has now grown to eight projects and more than 5,000 homes.

It will also be the first major Queensland project delivered by Roberts Co since the tier-one contractor was acquired by Arada Group in 2025.

Plus Studio has designed the Broadbeach development, which will comprise one, two and three-bedroom apartments across two towers connected by a landscaped podium.

A significant resident amenity offering will include lagoon and lap pools, a gym, sauna and steam room, alongside a mist room, infrared room and salt scrub facilities. Communal terraces, private dining areas, a library, residents' lounge and work-from-home spaces are also planned. Around 1,200 sqm of retail and hospitality space will occupy the ground floor.

The site puts Arada in one of the Gold Coast's most active apartment markets, directly opposite the convention centre and within walking distance of Pacific Fair, The Star Gold Coast and Broadbeach's dining and retail precinct.

It also has immediate access to the Gold Coast light rail network and sits just a few blocks from the beach.

Arada Group Chief Executive Ahmed Alkhoshaibi said Broadbeach represented an opportunity for the developer to expand beyond its initial NSW pipeline.

“Broadbeach is a world-class address that gives us the canvas to create a community of exceptional design and lifestyle quality that genuinely enriches the daily lives of the people who call it home,” Alkhoshaibi said.

“This is our first development outside New South Wales, and it reflects our growing ambition to grow in key urban markets around the country.”

Alkhoshaibi said bringing Roberts Co into the project would give Arada greater control over the development and construction process.

“Delivering this project through Roberts Co, our own tier-one construction business, means we can bring the quality, pace and accountability that our buyers expect.”

The move into Broadbeach comes as Arada accelerates its Australian expansion following its entry into the market two years ago. The developer has assembled a pipeline of eight projects comprising more than 5,000 homes, while the acquisition of Roberts Co last year gave the group its own Australian construction capability.

Globally, Arada has a development portfolio valued at $50 billion comprising more than 55,000 homes across the UAE, United Kingdom and Australia.

The Gold Coast is emerging as the next major market for the developer, with strong population growth and infrastructure spending ahead of the 2032 Games continuing to underpin significant apartment development across the coastal strip.

Arada plots $2 billion Broadbeach towers in major Queensland move

Sydney’s downsizer market is changing, with a growing cohort of buyers prioritising the right home over simply finding a smaller one.

Coronation Property Head of Sales Cam Porter says the traditional idea of downsizing does not necessarily reflect what many buyers are now looking for, particularly those moving from established family homes across Sydney.

Instead, he says they are increasingly becoming “right-sizers”, seeking lower-maintenance homes without sacrificing the space, amenity or quality they have become accustomed to.

“We are increasingly seeing buyers who are not motivated by the idea of simply moving into a smaller property,” Porter says.

“They are right-sizers. They want a home that is easier to manage and better connected, but they still expect generosity, quality and a floorplan that supports the way they live.”

It is a subtle but important distinction in a market where apartment developers are increasingly targeting established owner-occupiers.

[smartcode_project:default project_id=135149 project_image_fid=377495]

For many of these buyers, moving from a house to an apartment is not driven by a desire to dramatically reduce their living space. Instead, the appeal is in removing some of the maintenance associated with a larger home while retaining generous living areas, storage and enough flexibility to accommodate family and friends.

Coronation’s sales team is seeing buyers place particular importance on natural light, practical storage and additional rooms that can be used as guest bedrooms, home offices or secondary living spaces.

Kitchens and dining areas are also playing an increasingly important role, particularly for buyers who regularly entertain or have children and grandchildren visit.

[smartcode_project:default project_id=135149 project_image_fid=377494]

“These buyers still want their home to feel generous,” Porter says.

“They may want less maintenance, but they are not looking for less life.”

The challenge for the broader housing market is providing enough of the right stock to encourage that move.

While much of the discussion around Sydney’s housing shortage has centred on the number of homes being delivered, Porter says the diversity of those homes is equally important.

Older homeowners can remain in large family houses for longer when they cannot find an appropriate alternative in the neighbourhoods where they have built their lives.

“The decision is rarely as simple as wanting fewer bedrooms,” Porter says.

“People are weighing up their connection to a neighbourhood, the space they need for family, the quality of the home and whether it will continue to work for them over the long term.”

It also has implications beyond the downsizer market. Providing suitable apartments for smaller households can free up established houses for families who need the additional bedrooms and land, creating greater movement through the housing market.

<h2>Lillian targets the next stage of apartment buyer</h2>

It is a buyer Coronation is targeting at <a href="https://www.apartments.com.au/new-apartments/lillian-erskineville-9-metters-street-erskineville-nsw-2043">Lillian</a>, its new collection of apartments, terraces and penthouses at Erskineville Village.

Designed by Silvester Fuller, Lillian has been shaped around larger living spaces, natural light and flexible floorplans, alongside landscaped areas, wellness amenity and communal spaces for residents.

The development will form part of Coronation’s broader Erskineville Village precinct, which will combine new homes with green space, retail, hospitality and new pedestrian connections.

[smartcode_project:default project_id=135149 project_image_fid=377688]

McPherson Park will sit at the centre of the precinct, creating a significant new green space alongside the project’s retail and hospitality offering.

For Porter, the opportunity is to give buyers another housing option without forcing them to leave the part of Sydney they already know.

“People should be able to change the type of home they live in without having to change their entire life,” he says.

“For many buyers, Lillian offers the opportunity to remain connected to the Inner West and the city, while gaining access to a more convenient, walkable and considered way of living.”

[smartcode_project:default project_id=135149 project_image_fid=377687]

Coronation will explore the changing <a href="https://lillianresidences.com.au/news/lillian-x-space-x-downsizers-event-27-august/">right-sizer market at an event on August 27</a>, bringing together experts across property, design and lifestyle.

Held in partnership with SPACE, Poliform and Downsizer.com.au, the event will include a property market outlook from economist Michael Blythe alongside discussion around the considerations facing buyers planning their next move.

Attendees will also be able to learn more about the residences and amenity planned at Lillian Erskineville.

[smartcode_project_cta:default project_id=135149]

From downsizing to right-sizing: What Sydney buyers want from their next home

Family-owned builder and developer <a href="https://www.apartments.com.au/developers/omaya">Omaya</a> is bringing its 27-storey The Maybelle development to market, with the 229-apartment tower rising alongside Ismay Reserve near North Strathfield.

<a href="https://www.apartments.com.au/new-apartments/the-maybelle-21-parramatta-road-homebush-nsw-2140">The Maybelle</a> will comprise one, two and three-bedroom apartments, with its height providing elevated outlooks towards the Sydney skyline and Harbour Bridge, while other residences will look across neighbouring Ismay Reserve.

Designed by <a href="https://www.apartments.com.au/architects/squillace-architects">Squillace Architects</a>, the tower combines its parkside setting with proximity to the established retail, dining and transport amenity around North Strathfield.

[smartcode_project:default project_id=134873 project_image_fid=376196]

Residences will feature open-plan living spaces and a choice of two interior schemes, while communal amenity is spread across two elevated levels of the building.

Level 8 will be home to the Garden Pavilion, a full-floor resident space incorporating communal entertaining and breakout areas, seating and recreation spaces. Further up the tower, a landscaped Sky Terrace on Level 14 will provide another communal area with panoramic views towards the Harbour Bridge and Sydney skyline.

At ground level, the development sits directly alongside Ismay Reserve, where lawns, walking paths, children's play areas, picnic spaces and recreational facilities extend the green space available immediately around the project.

[smartcode_project:default project_id=134873 project_image_fid=376194]

The Maybelle is also within walking distance of North Strathfield and the Bakehouse Quarter, which provides a mix of cafés, restaurants, shops and everyday services.

Existing rail and bus services provide connections across Sydney, while the future North Strathfield Metro and access to the M4 will add to the transport options available around the precinct. Walking and cycling routes also extend via Powells Creek towards Sydney Olympic Park and its sporting, entertainment and parkland precincts.

Families are also well positioned for access to a broad selection of established schools and education options across Strathfield and the surrounding Inner West.

[smartcode_project:default project_id=134873 project_image_fid=376181]

Omaya has operated in Sydney for more than 35 years, managing projects from acquisition and design through to construction and delivery. The family-owned company is both developer and builder of The Maybelle.

Apartments start from $560,000, with the development protected by 10-year Latent Defects Insurance.

Construction is well underway, with completion expected by the end of 2026 and move-in anticipated from Q1 2027.

[smartcode_project_cta:default project_id=134873]

The Maybelle brings 27-storey parkside tower to market near North Strathfield

National Australia Bank (NAB) has brought forward the timing of the first RBA cash rate cut by three months.

NAB is now expecting a cut in February, in line with ANZ and Westpac, having initially thought a cut wouldn't come until May.

Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.

NAB changed its call following the August monthly inflation figures that were released at the end of September, showing it had dropped to 2.7 per cent.

"The risk has been skewed to a first cut earlier in 2025, and today’s change acknowledges the balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than we earlier expected," NAB noted in its latest update.

They added that the cadence of the cuts may be faster than its central profile.

"Domestic inflation pressures are cooling, but only gradually, and we continue to expect the conditions for a cut will not be in place this year.

NAB believes the easing cycle will end at 3.1 per cent by early 2026, which is five cuts from the current 4.35 per cent cash rate.&nbsp;

CBA also thinks 3.1 per cent will mark the end of the cutting cycle, while Westpac is forecasting 3.35 per cent, and ANZ is the most pessimistic at 3.6 per cent, which would be just three interest rate cuts.

<h2>What would a rate cut in February look like for borrowers?</h2>

According to&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://link.mediaoutreach.meltwater.com/ls/click?upn%3Du001.IVvjJ-2BPT0A8C3VxtqKc6e3bj5hBuw27WFEYqovsYs7kPsgFulYrdOzeP8gI7CybJOya3_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20hPXdLlPP9yD7DvFFDBM5yrTqxvcCiMfAsW1onD-2FcriL628eYdhNQE7bwzYrxcOYnmaYfRhGl-2FEHQ6eK2uQcLxs6Cbu6Dx0bYvpi5A6enmxMWU5TkcRYrP6Z8GbXZYtc5qSoKu6eWFBQR9K7fsjXwHMmby3D3X6Yx-2BxcDcdRruTG&amp;source=gmail&amp;ust=1727774368149000&amp;usg=AOvVaw2vK2ujS77CHs9VRvSSXzLC" href="https://link.mediaoutreach.meltwater.com/ls/click?upn=u001.IVvjJ-2BPT0A8C3VxtqKc6e3bj5hBuw27WFEYqovsYs7kPsgFulYrdOzeP8gI7CybJOya3_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20hPXdLlPP9yD7DvFFDBM5yrTqxvcCiMfAsW1onD-2FcriL628eYdhNQE7bwzYrxcOYnmaYfRhGl-2FEHQ6eK2uQcLxs6Cbu6Dx0bYvpi5A6enmxMWU5TkcRYrP6Z8GbXZYtc5qSoKu6eWFBQR9K7fsjXwHMmby3D3X6Yx-2BxcDcdRruTG" target="_blank">Canstar</a>, if there is a cut in February, a borrower with a $600,000 loan today and 25 years remaining would see their monthly repayments drop by $92.&nbsp;

<table border="1" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td colspan="3">
			Impact of 0.25% pt cut in February 2025
			</td>
		</tr>
		<tr>
			<td>
			Current loan size
			</td>
			<td>
			Drop in monthly repayment
			</td>
			<td>
			New monthly repayment
			</td>
		</tr>
		<tr>
			<td>
			$600,000
			</td>
			<td>
			-$92
			</td>
			<td>
			$3,907
			</td>
		</tr>
		<tr>
			<td>
			$750,000
			</td>
			<td>
			-$114
			</td>
			<td>
			$4,884
			</td>
		</tr>
		<tr>
			<td>
			$1M
			</td>
			<td>
			-$153
			</td>
			<td>
			$6,512
			</td>
		</tr>
		<tr>
			<td colspan="3">
			Source:&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://link.mediaoutreach.meltwater.com/ls/click?upn%3Du001.xWMOP9hChsvn-2BC9O-2FebBihXIZ4cEzbiuENdxm-2Bx3-2FYEEgYMhZlKWNj5Zzy1YZ56RuASD_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20v2akwr6-2BqLyRrlEgkJ4J-2BCCyY0x189xEHZA4Ylf8c7ChBqNIkhmftZzoFuZKFn43pw3oJVg2o1gumrpdA-2B7MB-2FBtmL2rFCI-2FXORATQHySCLVOMg7Vywv-2BqnnQUAtDz6XkvpwxdHFXh70VwKazzhJsICilEYOvP4ju0sIfi5g6TL&amp;source=gmail&amp;ust=1727774368149000&amp;usg=AOvVaw2qVnp6oqATgqDUi2Frm22q" href="https://link.mediaoutreach.meltwater.com/ls/click?upn=u001.xWMOP9hChsvn-2BC9O-2FebBihXIZ4cEzbiuENdxm-2Bx3-2FYEEgYMhZlKWNj5Zzy1YZ56RuASD_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20v2akwr6-2BqLyRrlEgkJ4J-2BCCyY0x189xEHZA4Ylf8c7ChBqNIkhmftZzoFuZKFn43pw3oJVg2o1gumrpdA-2B7MB-2FBtmL2rFCI-2FXORATQHySCLVOMg7Vywv-2BqnnQUAtDz6XkvpwxdHFXh70VwKazzhJsICilEYOvP4ju0sIfi5g6TL" target="_blank">www.canstar.com.au</a>. Starting rate is the RBA existing average owner-occupier variable rate of 6.36%. Assumes banks pass the cash rate cut on in full the month after the meeting.
			</td>
		</tr>
	</tbody>
</table>

Canstar Data Insights Director, Sally Tindall, says if core inflation continues to track in the right direction, or unemployment starts to accelerate significantly, we could well see a cash rate cut as early as February of next year.

“All four big banks now believe the RBA will be ready to cut the cash rate in just over four months’ time, if not before, in the case of CBA.

“However, the outlook for both inflation and unemployment is still highly uncertain. A couple of wobbly sets of inflation data could see the RBA holding for longer, particularly if unemployment remains relatively steady."

&nbsp;

Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.

NAB bring forward first RBA cut to February 2025

<html><body>
Online bank ING Direct is Australia’s biggest second-tier lender for owner-occupier mortgages and the Bank of Queensland has the biggest investor mortgage book, according to September figures released by the prudential authority APRA.
The second tier comprises banks that fall outside the big four banks and their subsidiaries, namely Commonwealth Bank (and its subsidiary Bankwest), Westpac (including subsidiaries Bank of Melbourne and St George), ANZ and NAB.
The latest figures show that ING Direct, the Australian subsidiary of the Dutch banking giant ING, has an owner-occupier mortgage book of $28 billion and an investor loan book of over $9 billion.
Bank of Queensland has an investor mortgage book of $9.6 billion and an owner-occupier mortgage book valued at $11.6 billion.
Both banks have passed on the full November 2 RBA rate cut to their borrowers, with ING Direct’s Mortgage Simplifier product reducing to a rate of 6.87%, effective November 7, while the Bank of Queensland will reduce its standard variable rate home loan to 7.61% on November 11.
Another small lender, Rabobank, which specialises in rural loans, will reduce the variable base rate on its rural loans by 0.25% per annum.
 
Second-tier lenders (ranked by size of owner occupier mortgage book)
<table border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td width="205" valign="top">
 
</td>
<td width="205" valign="top">
Owner occupier mortgage book
</td>
<td width="205" valign="top">
Investor mortgage book
</td>
</tr>
<tr>
<td width="205" valign="top">
ING Direct
</td>
<td width="205" valign="top">
$28 billion
</td>
<td width="205" valign="top">
$9.4 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Suncorp
</td>
<td width="205" valign="top">
$21 billion
</td>
<td width="205" valign="top">
$8.2 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Bendigo and Adelaide Bank
</td>
<td width="205" valign="top">
$13 billion
</td>
<td width="205" valign="top">
$8.3 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Bank of Queensland
</td>
<td width="205" valign="top">
$11.6 billion
</td>
<td width="205" valign="top">
$9.6 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Citibank
</td>
<td width="205" valign="top">
$4.7 billion
</td>
<td width="205" valign="top">
$2.4 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
AMP Bank
</td>
<td width="205" valign="top">
$4.6 billion
</td>
<td width="205" valign="top">
$1.7 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
ME Bank
</td>
<td width="205" valign="top">
$4.5 billion
</td>
<td width="205" valign="top">
$1.1 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
HSBC
</td>
<td width="205" valign="top">
$3.4 billion
</td>
<td width="205" valign="top">
$3.8 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
MECU Limited
</td>
<td width="205" valign="top">
$1.5 billion
</td>
<td width="205" valign="top">
$0.3 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Macquarie Bank
</td>
<td width="205" valign="top">
$1.4 billion
</td>
<td width="205" valign="top">
$0.7 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Bank of China
</td>
<td width="205" valign="top">
$0.3 billion
</td>
<td width="205" valign="top">
$129 million
</td>
</tr>
<tr>
<td width="205" valign="top">
Bank of Cyprus
</td>
<td width="205" valign="top">
$0.2 billion
</td>
<td width="205" valign="top">
$ 35 million
</td>
</tr>
<tr>
<td width="205" valign="top">
Rabobank
</td>
<td width="205" valign="top">
$0.2 billion
</td>
<td width="205" valign="top">
$16 million
</td>
</tr>
<tr>
<td width="205" valign="top">
Beirut Hellenic Bank
</td>
<td width="205" valign="top">
$120 million
</td>
<td width="205" valign="top">
$0.24 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Investec
</td>
<td width="205" valign="top">
$25 million
</td>
<td width="205" valign="top">
-
</td>
</tr>
</tbody></table>
Source: APRA
 
 
 
 
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lschlesinger-FZcF9M3vE6

ING Direct the biggest of the small

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Both Westpac and the Housing Industry Association believe further rate cuts are needed to stimulate new home lending following another “lacklustre” result in September. 
Housing finance to owner-occupiers increased by 2.2% September, but only 1% of this growth came from new mortgage lending with rest the result of borrowers refinancing their mortgages to take advantage of cheaper rates. 
The September result was slightly above market expectations (1.5%) but not as strong as that anticipated by Westpac, which had forecast mortgage growth of 3% over September. 
For the year to date, new lending is down by 3.8%. 
Westpac senior economist Andrew Hanlan says the RBA's November rate cut will provide some relief to the sector, with the bank sticking with its forecast of further 0.75% cut in rates still to come over the next 12 months. 
“New lending is only a little above that prevailing over the second half of the 1990s,” he says. 
Hanlan says the mix of finance was disappointing” from a new supply, construction perspective”. 
“Finance to owner-occupiers for the construction of new dwellings edged lower in the month, down 0.2%, to be 5.7% lower for the year to date,” he says.
HIA acting chief economist Andrew Harvey remains hopeful the fall in the number of loans for the construction or purchase of new homes is “merely a blip in an overall trajectory of a return to growth in new home lending”. 
“At least today’s fall in new home lending is not of an overly large magnitude, and once we see the positive impact of the Melbourne Cup day rate cut flow though we should see lending begin to gain ground. “Moreover, if the RBA fires up with a second rate cut in December, or at latest early 2012, which is warranted given domestic and global economic conditions, then the prospect of a return to decent levels of new home building is good,” he adds. 
 
“The sector faces a number of headwinds: interest rates, stretched affordability and household's desire to pay down debt. These factors are offsetting the positives of rising household incomes, relatively low unemployment and a shortage of housing stock.” 
By state, owner-occupier finance for the year to date reveals some divergences. 
There were signs of strength in WA, with mortgage lending to owner-occupiers up 9.1% over the nine months to September. 
However, NSW (1%) and South Australia (2.2%) are broadly flat for the year while mortgage lending has weakened in Queensland (down 9.5% for the year), Victoria (down 4%) and Tasmania (down 5%). 
Finance to investors was up 1.9% in the month, rebounding 8% since April, but still down 4.2% for the year to date. 
“While rents are strengthening, established house prices have tended to trend modestly lower since mid-2010,” says Hanlan.
<a target="_blank" href="https://www.propertyobserver.com.au/economy/one-rate-cut-not-enough-to-help-economy-but-watch-employment-data-macquarie/2011110952285">Macquarie Investment Management agrees that more rate cuts are needed.</a>
 
 
 
 
 
 
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More rate cuts needed following lacklustre mortgage lending figures: HIA

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First-home buyers have emerged from hibernation becoming a dominant segment of the housing finance enquiry market, according to mortgage broker Loan Market.
First-time buyer enquiry levels were at their highest in almost two years after activity plummeted following the cessation of the federal government boost in 2009 and a sequence of interest rate rises during 2010.
The segment, who seem poised to spend, represented 51% of loan enquiries to Loan Market during October, according to Loan Market chief operating officer Dean Rushton.
“We’re finally starting to see signs of optimism and more confidence from that segment of the market. And predicted further rate cuts from the RBA would help to build that confidence,” Rushton says.
Tasmania had the highest number of enquiries followed by Queensland, Victoria, the Australian Capital Territory, South Australia, Western Australia and the Northern Territory.
“After a few years of hibernation, first-home buyers are back and are now the dominant section of the market for enquiry,” Rushton says.
Rushton notes the end of stamp duty concessions for first-home buyers in New South Wales from the end of 2011 year has boosted activity in that state.
“The softer real estate market is another encouragement for first-time buyers if they are in a position to be active in the market,” he adds.
<a href="https://www.propertyobserver.com.au/news/one-in-10-buyers-choosing-to-rent-to-invest/2011070750728" target="_blank">One in 10 first-time buyers are choosing to make their first real estate purchase an investment property</a>. 
For advice on buying your first investment property, download our free e-book.
 
 
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jchancellor-FAypfDUnLy

First-home buyer lending enquiries at two-year high: Loan Market

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Scott Pape, the financial adviser, broadcaster and author of The Barefoot Investor, has explained why he is keeping his home loan variable despite the fact that the banks are currently offering lower fixed rates. He says he envisages 2012 will be the time to “tart yourself around to the banks” to get a better deal next year.
“One reason is that having the security of locking in your rate comes at a cost: (usually) fixed repayments, and a hefty break fee if you want to walk.
“Banks behave in their own best interests,” he told subscribers to <a href="https://www.barefootinvestor.com/" target="_blank">his website</a>.
“A smarter strategy may be to wait and watch what happens with the unfolding debt crisis.
“We could see official interest rates come down, and cautious consumers continue to slow their borrowing (building approvals dropped 13.9% in September), causing banks to scramble for our business next year,” Pape wrote.
“That’s when I’ll be looking to lock in my rate.”
Pape, whose early days were as an investment adviser with EL&amp;C Baillieu, says until then he will make extra repayments: the quarter per cent cut this week translates into an (average) $50 a month cut, or $41,000 saved in interest over the life of a loan.
Pape recently noted that since Wayne Swan banned exit fees, the banks had found another way to stop their customers from switching to get a better deal.
“Fixed-rate deals give them that power.”
But he noted there’d be a $600 establishment fee at the start, “and if interest rates drop lower than your fixed rate they will slug you with a ‘break fee’ representing the difference between the two rates, multiplied by the length of time left on your fixed contract – which can add up to thousands of dollars.”
“If you’re really struggling, locking in your rates can give you the security of fixed repayments, but for everyone else it’s too much of a gamble.”
 
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Scott Pape, the barefoot investor, suggests staying variable

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The NSW Valuer-General has determined that the land tax threshold for the 2012 land tax year is $396,000. Every investment property above that level will be billed land tax. It follows a 1.766% increase in values, which given three-year rolling averaging will result in a 0.2% increase in the land tax threshold for the 2011 land tax year of $387,000.
During the 2011 land tax year there had been a 2.9% rise in the 2011 threshold for property taxes from $376,000, when overall land values in NSW, including industrial and commercial as well as residential, rose an average of 5.42%.
The low 0.2% increase in the threshold might cause some NSW investors to creep into the tax-paying category if they were sitting just below the current threshold and have shown some value appreciation resilience in the yet-to-be released individual valuations.
NSW Valuer-General Philip Western will issue individual new valuations later this year that will form the basis of tax assessments sent out by the NSW Office of State Revenue early next year. The State Government bases individual assessments on rolling three-year averaging of land valuations to take account of changing property values.
The state government collects about $2 billion in land tax a year. Non-residential properties account for about 60% of land tax revenue.
In the current year an investor owning a property with a land value of $470,000 (with the 2011 threshold of $387,000) property tax is levied on the difference of $83,000 at 1.6¢ on the dollar, plus $100, so the tax payable is $1,428.
The principal place of residence is exempt from land tax. Land tax is a tax levied on the owners of land in NSW as at midnight on December 31 of each year. Land tax applies to land regardless of whether or not income is earned from the land. The land tax assessment is calculated on the combined value of all the taxable land you own above the threshold.
The value of taxable land does not include any structures or improvements on the land such as a house.
There has been a threshold since 2005. From the 2007 tax year onwards the threshold is the average of three years - the current year and two prior years.
<table cellpadding="0" border="1"><tbody>
<tr>
<td>
Year
</td>
<td>
Indexed amount
</td>
</tr>
<tr>
<td>
For the 2010 land tax year
</td>
<td>
$380,000
</td>
</tr>
<tr>
<td>
For the 2011 land tax year
</td>
<td>
$401,000
</td>
</tr>
<tr>
<td>
For the 2012 land tax year
</td>
<td>
$408,000
</td>
</tr>
<tr>
<td>
Average
</td>
<td>
$396,000
</td>
</tr>
</tbody></table>
 The Valuer General says the $408,000 figure was arrived at through a specific formula as required under the Land Tax Management Act.
“Put simply it is the 2011 land tax year indexed amount ($401,000) times the average change in land values from 1 July 2010 to 1 July 2011 – in this case 1.766%,” he notes.
For advice on buying your first investment property, download our free e-book.
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NSW land tax threshold increases 0.2% after a 1.77% across-the-board gain

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Migrants and the over-50 are set to become favoured home lending customers of ANZ.
In its 2011 annual results presentation ANZ says it is looking to form deeper relationship with five customer segments namely: “affluent, migrant, young money, over-50s and ANZ staff”.
Migrants and over 50s appear to be a particular focus of the bank, with <stockticker>ANZ</stockticker> committing to providing more specialist migrant teams and more bankers to focus on retirees.
First-home owners are notably absent from its list of desired customers.
The annual results revealed that first-home owners comprised just 9% of the bank’s $170 billion mortgage portfolio and only 8% of new lending in the 2011 financial year.
Owner-occupier mortgages make up just under two-thirds (64%) of its mortgage book.
NSW and the ACT (27%) and Victoria (28%) account for more than half of its mortgage portfolio, with just under one in five borrowers coming from Queensland.
The bank revealed a 12% rise in underlying profit for the 2011 to $5.6 billion.
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ANZ to focus on migrant and over-50 home loan customers

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The number of first-home buyer market entering the market is up 40% compared with a year ago, with NSW leading the charge, according to mortgage broker AFG. 
The AFG Mortgage Index for October shows that first-home buyers comprised 16.4% of all loans processed by AFG brokers – a 40% increase for this buyer category compared with October 2010, when they comprised 11.8% of the mortgage market. 
The number of first-home buyers who took out loans in October was the greatest number entering the market since September 2009 –when the full First Home Owner Boost Scheme, introduced to support the housing market following the GFC – came to an end. 
First-home buyers were particularly active in NSW, where they represented 21.1% of home loans in October. This buyer segment was also well-represented in Queensland (17.9%) and Western Australia (17.3%). 
The decision by the NSW state government to end first-home buyer stamp duty exemptions and concessions for the purchase of established on January 1, 2012 has most likely contributed to the pick-up in numbers as first-home buyers look to beat the deadline. 
From January 1 the NSW government’s <a href="https://www.osr.nsw.gov.au/benefits/first_home/faqs/fhplus1/">First Home Plus scheme</a>, which provides stamp duty exemptions on homes valued up to $500,000 and concessions on duty for homes valued between $500,000 and $600,000, will come to an end to be replaced by the <a href="https://www.osr.nsw.gov.au/benefits/first_home/faqs/new_home/">First Home - New Home Scheme</a>, which provides stamp duty exemptions and concessions for new homes or vacant land intended to be used as the site for a new home.
The November interest rate cut is expected to encourage more first-time home buyers over the coming months, with Real Estate Institute of Australia acting president Pamela Bennett calling it particurlarly good news for this sector of the market.
RateCity CEO Damian Smith says for first-home buyers who haven’t yet entered the market, “lower rates will turn the clock back to 2010 and have an appreciable impact on affordability”. 
BIS Shrapnel chief economist Frank Gelber expects first-home buyers to return to the market in growing numbers following the rate cut and to drive the market over the next year.
Percentage of borrowers fixing their home loans
<img style="border-style: initial; border-color: initial;" src="/images/stories/afgnovember3.gif">
Source: AFG
In line with mortgage broking franchise <a href="/news">Mortgage Choice</a> recording sales of fixed-rate mortgages at a three and half year high in October, AFG also recorded a big jump in fixed-rate mortgages, with sales of the products rising from 16.6% of all loans arranged in September to 20.4% in October, the highest proportion since March 2008.
In July 2011, fixed-rate mortgages comprised only 7.9% of home loans arranged by AFG brokers.
Mark Hewitt, general manager of sales and operations at AFG says: “Buyers are reaping the benefits of one of the most competitive mortgage markets we’ve seen in years. Discounted fixed rate loans appealed to all buyer types, but especially first home buyers and those looking to refinance. 
“We have been slightly surprised with the popularity of fixed rates given it has been generally predicted variable rates would decrease and we would now expect the proportion of fixed rate loans to fall, following the cut in variable rates announced this week,” Hewitt says. 
The October index also showed a growing desire among borrowers to use lenders outside the major banks and Hewitt is hopeful the rate cut will drive further support for a recovery of the second tier lending market. 
Non-majors have seized more market share than at any time over the past 12 months, comprising 21.1% of all home loans. 
Their products are of particular appeal to first-home buyers, where almost 30% of the market is held by non-majors, as well as buyers looking to refinance, where non-majors account for a 21.2% market share.
The percentage of investment loans fell slightly to 35.6% compared with 37.7% in October with investors especially active in NSW (39.2%) and Vic (38.9%) with lower levels of activity in QLD (32.9%), WA (32.2%) and SA (29.8%). 
AFG brokers account for one in 10 mortgages arranged in Australia.
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NSW leads revival of first-home buyer market - and the fix is on: AFG

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Do you get a fair return on your savings? And what returns do the major banks earn over and above the interest rate they pay you on your cash? Indeed, why do the banks “cap” the returns on your savings accounts at all? These are all interesting questions that I will use to prime today’s column.
We have become so conditioned to being subject to a fixed cap on our savings rates — either via a term deposit or through variable rates that adjust in line with the RBA’s target cash rate — that the notion of not having an interest rate cap seems positively odd.
But imagine if a bank turned around to you and said, “Instead of fixing your 12-month term deposit rate at, say, 5%, we are going to target giving you a 5% return, and if we can earn more on our lending and investing activities, we will pay you more. In this way, when the bank does well, you do well”.
Today the banks are implicitly saying the opposite: namely, “We will pay you 5% per annum fixed, and everything we earn above that we are keeping 100% for ourselves and our shareholders”.
To get to the bottom of this you need to first understand your relationship with the banks. When you put your money on deposit you are actually lending to them. In fact, legally and economically, you are a senior-ranking “creditor”. You are in the same position as the bank is when it lends money to you to buy a home. It is funny how nobody thinks of savings like this!
Yet on almost all your “at-call “or “transactional” savings accounts, you get little if any return (i.e., the banks usually pay zero interest rates). However, the longer you are willing to commit to lend to, or finance, the banks, the higher the interest rate they will normally offer you. Now this makes sense. The price of money ordinarily rises with the term of the loan.
What then do the banks actually do with your money? At its most basic level, they take the cash you lent them, which, formally, is a “liability” the bank must repay you, and use that money to make new loans to small businesses, corporations, and households. Roughly 60% of your money will be invested in residential and investment property loans. The remaining 40% will be lent to businesses, from SMEs to large companies.
The bank then generates two forms of return over and above the (much lower) interest rate it pays you. First, it charges businesses and households substantially higher rates than those which you earn on your savings accounts.
According to RBA data, the average “discounted” home loan rate following Tuesday’s cut should be around 6.8% per annum. In comparison, the average bank pays a 0% interest rate on your transaction account. If we take the average “bonus” savings account, the typical bank is paying you about 5.2%.
In this case, therefore, the spread between the interest rate the bank earns on its home loans and the interest rate it pays you on your cash is about 1.6% per annum.
Remember, however, that 40% of your money is being lent to businesses. Again using RBA data adjusted for Tuesday’s cut, the average small business pays a 9.7% per annum interest rate on its bank loans. If the small business offers up a home as security for the loan, the interest rate will be just under 9%.
So when it comes to small business lending, the interest rate the banks earn (or “spread”) beyond that which they pay you in your “bonus” savings account are between 3.6% and 4.5% per annum.
What about the rates the banks charge on personal loans and credit cards? According to the RBA, the average personal loan rate is around 15% per annum, while the average “discounted” credit card rate is 13.2%.
Once again, the banks are earning substantial interest rates beyond what they pay on your savings. In fact, multiples more in the case of personal loans and credit cards, even after accounting for loan losses.
All told, the RBA estimates that the average net interest rate the major banks generate beyond the interest they pay on their funding is about 2.4% per annum.
Regional banks earn a materially lower 1.6% per annum spread, or “net interest margin”. Why do they do worse? They pay higher rates to the people that fund them. So why do they have to pay more than the majors? Because their “credit ratings” are lower. This means their perceived risk is higher.
(As an aside, I have previously argued that the risk of catastrophic loss in a simple, “narrow” bank like a “regional” is less than that associated with a much more complex conglomerate like the majors, which are stretched across Australian and foreign operations, and all manner of other activities, including funds management, and proprietary trading.)
The average 2.4% interest rate the majors generate above their cost of funds is then boosted significantly further by “non-interest income”, which mainly refers to “fees”.
 
<hr class="system-pagebreak">
 
That’s the easy part. The much more complex aspect of the business of banking is that these enterprises take the cash (or “equity”) they get from their shareholders and use it to make loans to businesses and home owners that are worth multiples of that equity. That is, they are highly “leveraged”.
More specifically, they borrow for the relatively short term from people like you and me, and from institutional investors (roughly 50% of their money comes from mums and dads, 40% from institutions and 10% from shareholders), and then lend that money out for up to 30 years as home loans.
This begs the question: what happens if I want my money back? If, for example, I have put $100 in my savings account, and the bank has used that money to offer 30-year home loans, how can the bank possibly repay me my money?
The short answer is it can’t. The business of banking is based on what is known in the jargon as an “asset-liability mismatch". Every once in a while mums and dads decide they don't trust the bank anymore, and rush to withdraw their cash en masse. At the same time, the institutional investors that lend the banks the other 40% of their funding for terms ordinarily less than five years may also refuse to roll over these loans.
Under the law, if you do not have a reasonable expectation of meeting your current liabilities (e.g., repaying your depositors), you are, by definition, trading insolvent. So if there were ever a “run” on a retail bank, with large volumes of depositors asking for their money back, the bank would be legally insolvent in the absence of some other support from taxpayers.
In order to address this flaw at the heart of banking, which every few decades tends to lead to banking crises (in the 1890s around 90% of all private banks in Australia failed), governments have developed a number of safeguards.
The first protection was to create a taxpayer bank that was explicitly established to lend to the banks, and thus supply them with so-called “liquidity”, during crises. This is known as the Reserve Bank of Australia, and a self-described part of its mandate is to serve as a “lender of last resort” to the banking system.
A second, more recent, protection was to supply a minimum taxpayer guarantee of retail deposits. That is, if the bank fails, the government will guarantee that a minimum dollar sum will be repaid to you.
A third protection used during the global financial crisis (for the first time) was to have Australian taxpayers guarantee the banks’ institutional debts. That is, the government told the banks’ institutional lenders that if the banks ever defaulted on these loans, taxpayers would step in and pick up the tab.
If you think through this carefully, you start wondering about what is a fair distribution of returns between banks and their creditors (i.e., you and me). You ask yourself the question, "With all this taxpayer support, should I be expecting more bang for my buck on my savings?"
We have learnt today that ignoring all the fees banks produce on their products, they are able, on average, to generate net interest rates of around 2.4% per annum beyond what they pay their funders: viz., savers and their institutional lenders.
In thinking about the question of fairness, I will leave you with one chart. It was recently published by the Reserve Bank of Australia, and it shows the major banks’ “returns on equity”. In the last half-year, these annualised at close to a 20% rate. 
Regional banks manage to attract shareholders with much lower, early-teen, returns on equity. We need more give, and less take.
<img src="/images/stories/nov3.gif">
Christopher Joye is a leading financial economist. The above article is not investment advice.
 
 
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chrisjoye-JYhJsTrNRC

More give, less take from banks

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By the reaction in the media, yesterday's rate cut by the Reserve Bank is the greatest thing since, well, the last rate cut 31 months ago. It's going to boost <a href="https://www.smh.com.au/business/retail-likes-rate-cut-20111101-1mtvg">retail</a>, <a href="https://smh.domain.com.au/boost-for-home-owners-as-banks-pass-on-rate-cut-20111101-1mtzj">housing</a> and even <a href="https://www.news.com.au/money/interest-rates/christmas-cheer-over-latest-rates-cut/story-e6frfmn0-1226183081358">Christmas</a>. Truly a miracle.
Yet all this reaction, and that on TV and radio yesterday and this morning, completely misses several important points.
The first is that the rate cut will cause the banks to cut their deposit rates, meaning savers will have less income, especially those who depend on fixed income from bank term deposits, such as pensioners and superannuants.
Secondly, the cut will, if it sparks a halt to the current slide in housing prices across all capital cities (they fell 1.2% in the September quarter, according to the Australian Bureau of Statistics and 2.2% in the 12 months to the same quarter), then house prices will start rising, thereby ending the small improvement in housing affordability we are currently witnessing.
But more importantly, the group of people who will get relief from the lower cost of their housing and other loans is much smaller than you thought.
If only our pundits in the Fairfax and News Limited press, plus the ABC, had read the Reserve Bank's Financial Stability reports, such as the <a href="https://www.rba.gov.au/publications/fsr/2011/sep/pdf/house-bus-bal-sheet.pdf">second one for 2011</a> released in late September they would have found something to their interest, and changed their reporting yesterday and today.
Put simply, many Australians are deleveraging and saving more. The higher savings are well known, but not too many of our pundits have bothered to think about how that is being achieved; it is not just a case of saving more money in their accounts ($12 billion extra in September)
Australian mortgagees are repaying more than the minimum on their housing loans, and credit card holders are also repaying their credit card loans faster than they have to. As the RBA explained in the September Stability Review:
"Contributing to the slower pace of debt accumulation, some households are saving more by choosing to pay down their debt more quickly than required.
"Net repayments on credit cards have picked up in recent months. Many housing loan borrowers have continued to make substantial excess principal repayments, even as higher interest rates have raised required interest -- and thus total -- repayments.
"The average excess repayment is currently equivalent to around three-quarters of the scheduled total (principal plus interest) repayment. Consistent with this tendency to pay debt ahead of schedule, surveys have shown that a high share of households consider repaying debt to be the wisest place for savings.
"Households that make excess repayments on their home loans generally build up buffers that they can draw down in the future if required. This should be regarded as a positive development for the resilience of the sector. These shifts in saving and borrowing behaviour have in part been enabled by a favourable labour market and solid income growth.
"Growth in gross income therefore outpaced the impact of higher interest payments, such that growth in real disposable income per household (after interest payments) also strengthened, to 3.3 per cent over the year to the June quarter, up from 2.3 per cent over the year to the December 2010 quarter.
"This increases the resilience of households to shocks, relative to countries where it is less common to do so. As well as providing a cushion against changes in borrowers’ financial circumstances, excess repayments increase the distance between the remaining loan balance and a property value that could be lower in the future, making negative equity positions less likely."
These trends are also ignored by the same writers when they warble on about the rising level of mortgage stress. Mortgage stress has always been with us, no matter the state of interest rates; some people who have lost jobs, seen pay cut or are starting out on the home buying treadmill feel it more than others.
But how can mortgage stress be a problem when a large proportion of people with mortgages are paying off those mortgages faster than they can? In other words, they are paying back more than the minimum, which is always recommended by advisers because it builds up buffers and reduces the principal faster than it would normally be reduced.
The fact that Australians with mortgages are repaying their loans faster is also ignored by the doom and gloomers who predict a nasty fall in property prices and a re-run of what we have seen overseas. They include Professor Steve Keen.
And finally, the most desperate piece of marketing came from Fairfax property website Domain, which sent <a href="https://view.email.domain.com.au/?j=fe6815757367057d7610&amp;m=fecb15717d62067f&amp;ls=fde511727c6000787d137970&amp;l=fe9c157177600c7c77&amp;s=fe281c7574640379771177&amp;jb=ffcf14&amp;ju=fe2715797c61017b741672&amp;r=0">this email</a> to registered users yesterday afternoon:
<a target="_blank" href="https://view.email.domain.com.au/?j=fe6815757367057d7610&amp;m=fecb15717d62067f&amp;ls=fde511727c6000787d137970&amp;l=fe9c157177600c7c77&amp;s=fe281c7574640379771177&amp;jb=ffcf14&amp;ju=fe2715797c61017b741672&amp;r=0"><img src="/images/stories/dyernov3.jpg"></a>
"This fall in rates will be greatly appreciated by households as it will put an extra $60 into their pockets each month," said Domain property expert Carolyn Boyd. Talk about desperation.
The reality is that most mortgage holders will simply leave their payments unchanged and effectively repay their loan by an extra $60 a month or whatever the saving is on their mortgage.
This article originally appeared on <a target="_blank" href="https://www.crikey.com.au/">Crikey</a>.
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The great mortgage stress myth: We're paying off our homes faster

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Federal Treasurer and Acting Prime Minister Wayne Swan has launched a vitriolic attack on NAB, labelling the bank “greedy” and saying it has “kicked working families in the guts” after it did not pass on the full 25-basis-point rate cut to borrowers today.
The bank will pass on 20 basis points rather than 25 basis points, blaming increased costs of funding for the decision.
“It is a greedy decision and one not justified in my view by the fundamentals,” says Swan, who before yesterday’s RBA announcement said banks would have no excuse for not passing on the full rate cut.
The attack comes despite the fact NAB has offered the lowest standard variable rate of the major banks for over two years and will continue to be the cheapest lender of the big four when it cuts its rate from 7.67% to 7.47% on Monday next week.
The five basis points the bank will not pass on to borrowers will boost its earnings by an estimated $65 million. Last week NAB announced its annual profit for the 2011 financial year was $5.2 billion.
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