Reserve Bank Governor Philip Lowe has tried to allay concerns among Australian borrowers over the prospect of an interest rate hike, saying it will come at a time when wages and l jobs are stronger.
He also told federal politicians that after two years of savings thanks to the COVID-19 pandemic, there was an additional $250 billion in people’s bank accounts, while homeowners built “big buffers” when it comes to paying the mortgage.
“Three years ago, the median borrower had a buffer equivalent to one year of interest and mortgage payments,” Dr. Lowe told the House Economics Committee on Friday.
“Today, the median borrower has a mortgage payment buffer of over two years. Households, on the whole, have been quite reasonable.”
In his semi-annual appearance before the committee, Dr Lowe indicated that the cash rate could rise from its all-time high of 0.1% later this year.
“Higher interest rates will happen where people have stronger wage growth and jobs,” he said.
Over the past year, home prices have risen at a national rate of more than 20 percent and the highest since June 1989, making home ownership out of reach for many.
“There’s no silver bullet here, but like most things, prices are determined by a combination of demand and supply,” Dr Lowe said.
He said it was important to take care of the supply side, which includes well-located land, good transportation policy, and good planning and zoning policies.
“It’s the offer that needs to be more flexible,” he said.
He said that over the past two years there has been a huge demand for floor space due to the pandemic, with people working and their children learning from home.
“There’s not much we can do on the demand side. People naturally want houses, they want to live in the fantastic cities of Australia and they want a block of land,” Dr Lowe said.
Meanwhile, homeless advocate Everybody’s Home is calling on the federal government to include the construction of 25,000 new public housing units in the budget for March this year to help tackle the worsening affordability crisis. .
Kate Colvin of Everybody’s Home said investment in social housing was urgent and needed.
“Secure housing is the foundation of stability and security. It means you can take care of your health, take care of your family, join the labor market and contribute to society. Without housing, none of this is not possible,” she said.
“As our leaders put the final touches on the budget, they need to be aware of all the benefits of social housing as well as the profound human cost of not providing people with housing.”
Australian Associated Press