Banks and Interest Rates - Aussie Stock Forums

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  1. #1

    Default Banks and Interest Rates

    Does anyone know if it is interest rate rises or cuts (or both) that Banks profit from?

    One article I read stated that Australian banks make $25 million a day on the average difference in the cash rate verses cash deposit rates (I have never known cash deposist (transaction accounts) rates to increase in line with a rise in the official cash rate. Simarily Banks make a killing on cash while we WAIT for our cheques to "clear".

    I question if banks may stand to make alot in the way of fees as people start to lock into fixed rate loans (and are forced to pay break fee's on the existing loan.)

    I think it was in Shares that I read that historically banks have continued to make increasing profits in the event of rate rises and the softning of the housing market.

    Any thoughts?
    The greatest trick the devil ever played was convincing mankind he does not exist.

  2. #2

    Default Re: Banks and Interest Rates

    Basically rises are negative for banks.

    Less people inclined to take out home loans, and in this highly competitive field, causes margin squeeze.

    Added to this, it is a negative for all stocks in general as it increases the return of a 'risk free' investment (stick your money into a hsbc account and get 4-5% return)

  3. #3

    Default Re: Banks and Interest Rates

    Banks dont like rising rates because APRA forces banks to own lots of bonds. Bond prices fall when rates rise.

    and then theres the whole mortgage lending issue...

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