The Reserve Bank of Australia (RBA) governor Philip Lowe says the central bank is “sorry” for the aggressive interest rate hikes that have hit Aussie mortgage holders hard.
Answering questions at a Senate Economics Committee inquiry, the RBA boss apologised for the bank’s initial guidance that interest rates wouldn’t rise until 2024 - but he stopped short of taking all the blame.
"I'm sorry that people listened to what we've said and acted on that, and now find themselves in a position they don't want to be in," Lowe said.
Also read: RBA told to ‘keep hiking’ interest rates
"But, at the time, we thought it was the right thing to do. And I think, looking back, I would have chosen a different language. People did not hear the caveats in what we said.
“We didn't get across the caveats clearly enough, and the community heard ‘2024’. They didn't hear the conditionality. That's a failure on our part, we didn't communicate the caveats clearly enough, and we've certainly learned from that."
The RBA has hiked the official interest rate seven times since May, with another interest rate hike expected when the bank meets again next week.
Mortgage holders in crisis
The result of those interest rate hikes have hit mortgage holders hard, with even those with smaller loans forking out tens of thousands of dollars more per year.
Head of consumer research at Finder Graham Cooke said Aussies with a $500,000 mortgage would be paying $815 more a month compared to just seven months ago.
“The current series of rate hikes has added almost $10,000 to the annual cost of a $500k mortgage,” Cooke said.
And those on fixed mortgage rates were not safe either. Fixed rates hit a record high halfway through last year as borrowers took advantage of record-low interest rates.
RateCity found if an owner-occupier fixed their $500,000, 25-year loan in July 2021 for two years on the average Big Four bank rate, they would be paying approximately 1.94 per cent.
When their fixed term ends in July next year, they could be facing an average revert rate of 7.18 per cent, if Westpac and ANZ cash rate forecasts are realised.
If they don’t negotiate their rate at this point, their repayments would rise by 65 per cent.
Assuming someone did renegotiate and landed on a rate of 6 per cent, their monthly repayments would still rise by $1,028. That’s still a 49 per cent rise in repayments.