The banks had taken the opportunity of a quiet market to renegotiate their contracts with the bond originators and it seems there has been a power shift from originators (squeezing the bank's rates to as low as 4% under prime) to the banks dictating rates of up to 4% above prime.
Since 2005 the banks have steadily lost business to the originators, as the chart below shows the banks hardly granted any bonds (directly to customers) by end of 2008. This gave the originators the upper hand and they also squeezed the banks for commissions of up to 2.5%, which resulted in the banks paying the originators billions per year! These billions ultimately came from customers in fees and charges.
The banks have now renegotiated the originator's commission down to around 1.5% and are aggressively encouraging clients to approach them directly for bond finance at a rate lower than the originators can negotiate.
I hope that once the banks start feeling the benefits of the increase in revenues from interest rates above prime and lower commissions to originators they will give some back to their clients in the form of lower bank fees and also in lower bond rates!
Remember all these costs were shifted on to us as consumers in the form of admin fees and bank charges!
Source: Financial Mail
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