dfinanz - fair rate movement

[eagle]

Came across this global social network for finance. Makes interesting reading/listening. The founder is apparently an Australian ex banker who thinks banks have had their own way for too long. You put in your bank and what your mortgage rate is and then put in what you think a "fair" mortgage rate would be. The idea is to get the numbers to put pressure on the banks. I see a few NZs have put in their rate.

https://www.youtube.com/channel/UCXazonIo8HcqJf7Tjw4hxBA

https://www.dfinanz.com
http://www.businessinsider.com.au/people-are-comparing-mortgage-rates-on-this-social-network-and-it-could-shake-up-australian-banking-2015-6

[L Plates]

About time someone stood up to the big banks. I like the idea he wants to use the power of people to bring about change. Most of us whinge about banks and their charges, but on our own we can't change much. With enough people clamouring for a "fair rate" the banks might have to listen.

[Rock]

Yes, we should stand up to the big banks! they are the ones taken out less than 1% interest loans from overseas but overcharging on us!

[Anthonyacat]

Yes, we should stand up to the big banks! they are the ones taken out less than 1% interest loans from overseas but overcharging on us!

In fairness, when borrowing from overseas, the interest you pay is the least of your concerns. If a NZ bank had borrowed $100M from a bank in London two months ago (£50M), lending it at 6% it has earned $1M in interest (less any interest paid to London). But the currency movements mean it now owes $122M, and climbing by the day.

If they want to take on that sort of risk in exchange for a few percentage points margin, I'm happy to pay the margin.

[Damap]

Like ^^^^^^^

[Rock]

In fairness, when borrowing from overseas, the interest you pay is the least of your concerns. If a NZ bank had borrowed $100M from a bank in London two months ago (£50M), lending it at 6% it has earned $1M in interest (less any interest paid to London). But the currency movements mean it now owes $122M, and climbing by the day.

If they want to take on that sort of risk in exchange for a few percentage points margin, I'm happy to pay the margin.

Well, the FX risks can be easily eliminate by Hedges i.e FX forward contracts. The cost to them is really tiny tiny and if their FX fellow smart enough they can even make more money out of it by "options". So they should charge us even lower interest rates!!!

[Anthonyacat]

I've never bothered with ForEx trading myself; it's a zero-sum game where one person's gain comes entirely from another's loss. On average, everyone loses as a result of transaction costs.

I don't really want my bank playing games in the ForEx market; least of all in an effort to employ someone 'smart' enough to make money on "options", which again are a zero-sum game.

I am not aware of the true cost of hedging, but I'm certain if it truly were 'really tiny tiny' everyone would do it?

Frankly I'm amazed there are people complaining about interest rates in the current environment. Were you around for the 9-10% rates ten years ago? Or the 20-25% rates in the 80s? You can fix a five year mortgage under 5% today. That's nothing to complain about.