eli5: who or what is profiting from the MASSIVE interest rate rises in Australia? Is it the banks holding your mortgage? The Government?!.. basically, who is loving life right now?
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A quick look at the rates online suggest that the rate is around 4.85. I got my first house in 2001 and it was 7.45.
Rates have been lower than all of recorded history and now they return to tree norm and everyone moans.
A quick look at the rates online suggest that the rate is around 4.85. I got my first house in 2001 and it was 7.45.
Rates have been lower than all of recorded history and now they return to tree norm and everyone moans.
Insurance companies receive premiums upfront and owe larger sums at dates far out in the future. Higher interest rates and inflation mean the future value of money declines, consequently reducing the future value of their liabilities. Furthermore, they get higher returns on their holdings that are fixed income.
A good example would be Jackson Financial (JXN on NYSE), an annuity provider. 2019 and 2020 they lost a whopping $13 and $24 per share. In 2021 they returned $31 to shareholders and 9 months into 2022 they returned $71ish (more than 2x the share price).
Insurance companies receive premiums upfront and owe larger sums at dates far out in the future. Higher interest rates and inflation mean the future value of money declines, consequently reducing the future value of their liabilities. Furthermore, they get higher returns on their holdings that are fixed income.
A good example would be Jackson Financial (JXN on NYSE), an annuity provider. 2019 and 2020 they lost a whopping $13 and $24 per share. In 2021 they returned $31 to shareholders and 9 months into 2022 they returned $71ish (more than 2x the share price).
Nobody directly. Everybody indirectly. This is central bank squeezing tight the money supply in order to stabilize prices, as is their job. This is just monetary policy done the way its meant to be done.
Nobody directly. Everybody indirectly. This is central bank squeezing tight the money supply in order to stabilize prices, as is their job. This is just monetary policy done the way its meant to be done.
The banks holding your mortgage are the primary beneficiaries of the MASSIVE interest rate rises in Australia. The banks are able to increase their profit margins as they charge higher interest rates on the loans they provide. The Government also benefits from the higher interest rates as they receive more revenue from taxes on the banks’ profits.
The banks holding your mortgage are the primary beneficiaries of the MASSIVE interest rate rises in Australia. The banks are able to increase their profit margins as they charge higher interest rates on the loans they provide. The Government also benefits from the higher interest rates as they receive more revenue from taxes on the banks’ profits.
Honestly, no one is.
The rising interest rates are being set by the Reserve Bank in an effort to curb inflation by making it less desirable to borrow large sums of money to pay for goods and services. The theory being if people stop spending free or cheap credit for all the overpriced stuff (like mortgages for real estate), then the prices will come down. Hopefully this will flow down to the essentials as well.
Banks aren’t particularly happy about it, because the rise in interest payments for loans they are getting is being offset by the interest they have to pay on their deposits and their own loans.
Consumers already aren’t happy about it, but this had been coming for a long time. The covid pandemic sent the economy into a tail spin, so the reserve bank lowered interest rates to make credit cheap so the wheels could keep turning. Unfortunately at the same time, a lot of real estate prices exploded. Taking both into account it was only a matter of time until prices on other goods followed when pandemic conditions alleviated. Now inflation is higher than expected or desired and interest rates have to come back up anyway, it’s just a very unfortunate timing.
Honestly, no one is.
The rising interest rates are being set by the Reserve Bank in an effort to curb inflation by making it less desirable to borrow large sums of money to pay for goods and services. The theory being if people stop spending free or cheap credit for all the overpriced stuff (like mortgages for real estate), then the prices will come down. Hopefully this will flow down to the essentials as well.
Banks aren’t particularly happy about it, because the rise in interest payments for loans they are getting is being offset by the interest they have to pay on their deposits and their own loans.
Consumers already aren’t happy about it, but this had been coming for a long time. The covid pandemic sent the economy into a tail spin, so the reserve bank lowered interest rates to make credit cheap so the wheels could keep turning. Unfortunately at the same time, a lot of real estate prices exploded. Taking both into account it was only a matter of time until prices on other goods followed when pandemic conditions alleviated. Now inflation is higher than expected or desired and interest rates have to come back up anyway, it’s just a very unfortunate timing.
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