Politicians miss the point over Bank profits

It’s not surprising the main banks are raking the money in. We’ve had high interest rates for years now, and the majority of the lending (mortgages) is locked in on long term loans that will see the profits roll in for some time to come.

Banks here have also been fairly careful about lending and have moved swiftly to call in any dodgy looking mortgages.

I’m guessing that the Reserve Bank Governor and Bill English are playing to the public gallery when they make nosies about being “disappointed” banks are not passing on the lower interest rates.

It’s all about pretty basic economics, supply and demand.

There is still a strong demand for mortgage lending, strong enough for the banks to not have to compete too strongly with each other for customers, and this is why interest rates are not falling. If the actual pool of mortgage customers had shrunk to the point that the main banks were fighting each other for custom, then you can be sure that rates would be a lot lower. Unfortunately the only way this will happen is if the housing market collapses completely and buyers dry up, and so far this hasn’t happened. There are still enough people out there who can ‘afford’ to pay the high rates and meet the stricter lending requirements for mortgages.

Until the demand drops, Bill English and Alan Bollard can whine all they like, but things won’t change as Banks don’t have to budge. Naturally both of them know this, well, you’d hope they understand this, which is why this is all nice headline material for the MSM.

If the MSM wasn’t so lazy and allowed Politicians to write their stories for them, what they would be doing is calling out the Banks over what they are doing with the profits and why they needed to shed staff so quickly. They could also ask why the ANZ Chairman was tooling around the Pacific being treated like royalty in a corporate jet while the bank was crying poor and laying off staff. They could also be doing a bit more digging on how the ANZ is screwing it’s customers over with the ING scam, where it put customers money into high risk investments, telling them it was low risk. Those events would make for a far more interesting stories.

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