I may not always be a big fan of politicians – from any party – but any politician who tells my bank not to raise my mortgage interest rate has got to be okay in my books. That’s what the federal treasurer Wayne Swan has been saying this week after a big government announcment on the ending of bank funding guarantees.
These government guarantees, which were set in motion during the global financial crisis, were the Australian government’s way of helping our banks and other lending institutions to avoid the fate of some of their American counterparts, the ones that got splashed across the headlines during the economic downturn, as well as making it possible for the general population to continue borrowing money despite the crisis. The injection of money was a way to guarantee that banks could continue lending money without being at risk, and it was distributed both to traditional banks and to non-bank lenders.
But now, with all the economic signs looking positive, it’s time for the guarantees end, and to hope that thiss doesn’t have any impact on mortgage rates for now. Other countries which offered similar guarantees to their lending institutions have ended them already, or have announced their imminent end, so the Australian government has said it doesn’t look good to be boasting of our good economic position while we still have such guarantees in place.
Along with the announcement that they would end came a strong warning from Wayne Swan to banks and other lending institutions not to use the end of the guarantees as an excuse to raise interest rates. Robbed of the chance to do so last week when the Reserve Bank surprised us by holding the cash rate steady at their February meeting, Swan seemed to have a suspicion that some banks might use the government announcement as an excuse to make us mortgage holders pay more. However, he’s quite forcefully said any lender which blames the government while they raise interest rates in the near future will “face the wrath of the Australian government”, so hopefully we’re safe for another couple of weeks at least – we’ll have to see what the Reserve Bank does at its March meeting.