Amidst speculation of rising interest rates, Prime Minister Malcolm Turnbull has assured the public that banks will take a softer stance with borrowers caught by future rate rises.
“We always expect them to [show compassion],” he said in an interview with Neil Mitchell on 3AW
on Thursday (20 July). “Ultimately their business is based on the goodwill of their customers.”
Turnbull also urged caution about overreacting to the Reserve Bank of Australia’s (RBA
’s) suggestion that the neutral cash rate will rise to 3.5%.
“They’re not saying they’re going to go to that tomorrow,” he said. “I think they’re sending a signal, which is probably prudent.”
Borrowers should be aware however that rates will eventually rise and should exercise prudence in their financial activities, he added.
“You’ve got to be careful about not getting over-committed. Don’t assume that asset prices are always going to go in one direction. So prudence in managing your financial affairs is always important.”
While he acknowledged that rising interest rates would put a lot of pressure on those who had over committed themselves, Turnbull said he did not want to create a sense of “excessive anxiety” around the matter. Instead, he simply called for awareness that rates were more likely to go up than down – following the global trend.
“That’s why it’s better if you’re buying your own home not to buy it with an interest-only mortgage but make sure you’re paying off principal. That’s the sort of common sense financial advice your grandmother would have given you.”
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