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The new banking reform package may actually increase the interest rates for average borrower!
Look, I understand why so many people have such an issue with banks increasing interest rates particularly when you see them making such big profits. But it would be fantastic if we actually could bring less emotion and more sanity into some of this hype.
Firstly, I would much rather a healthy banking system that makes great profits, than be in the situation faced by most other countries around the world, such as Ireland (where their banking system has nearly collapsed), Iceland (where it did collapse), Greece (where it has to be bailed out), Portugal (under threat), Spain (under threat) and the US (just bad).
The impact of a non profitable banking system is severe, with pressure on a whole range of other 'taken for granted' government services as those governments have to cut pensions/reduce spending or increase taxes. Just look at the recent riots in London.
Most of the Australian banks actually 'lose money' on their home loans for the first few years, as they are unable to recover the real costs of their establishment. When you consider that many people re-finance every four years, it is difficult for banks to recover their costs, particularly when you consider that many of them pay brokers to set these loans up for them.
So any attempt to prevent banks from recovering these costs by imposing government restrictions may have the unwanted consequence of actually forcing rates up as they attempt to recover their profits accordingly.
So, rather than do that, the best solution is to educate customers on how they can actually 'lower' their mortgage interest rates by taking proactive action themselves. Stay tuned, I will be releasing soon a FREE GUIDE to help you do just that.
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