Ian Macfarlane says recent mortgage borrowers at risk of being squeezed by higher interest rates should not prevent the central bank from raising rates to the level needed. RBA rates
Former Reserve Bank of Australia governor Ian Macfarlane says recent mortgage borrowers at risk of being squeezed by higher interest rates should not prevent the central bank from raising rates to the appropriate level, as it tries to slow the economy and dampen inflation.
While he did not express a firm view on how high the cash rate would rise, Macfarlane said the RBA’s decisions on interest rates could not be “held hostage” by the most recent or marginal borrowers. “But I think the central point I want to make is that you can’t allow the marginal mortgage borrower to determine the central bank’s ability to change interest rates. They can’t be really held hostage by the most recent mortgage borrower.”
The former RBA official, who is also a former director of ANZ Bank, pointed out many Australians with mortgages were ahead on their repayments, and said that in the past households had tended to “grin and bear it” when home loan rates increased.“They continue to service their mortgage. They cut back elsewhere - they have to cut back elsewhere, but they continue to service their mortgages. That’s one of the reasons why we have extraordinarily low incidence of mortgage delinquency,” he said.
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