Australians have expressed their dissatisfaction with financial investment guru, Scott Pape, also known as the Barefoot Investor after he told homeowners they need to take some of the blame for their own decisions as interest rates soar.
Pape was responding to a homeowner named Ben, who wrote to him, expressing frustration over Reserve Bank governor Philip Lowe’s forecast that interest rates would not rise until 2024. Pape believed Lowe had “stuffed up right royally” but also called on mortgage holders to take some of the blame for borrowing too much money. His comments received a backlash from some readers, with one even sending an angry missive that read, “F*** you.”
One reader named Linda wrote to Pape, expressing her disappointment and saying that she had to make sacrifices to make ends meet. She and her husband have added second jobs to deal with the financial stress caused by the rate rises and cost of living.
She has also started lining up at food banks each Tuesday so that her children can have fruit and bread. Linda had taken out a hefty loan because Mr Lowe had forecast that interest rates would not rise, and the increase in rates has caused significant financial strain.
According to another report by Stephen Johnson, a Reserve Bank program that handed banks $188 billion to provide ultra-cheap home loans at the height of the Covid lockdowns appears to be playing a key role in Australia’s cost of living crisis. Mortgage holders who signed up for low fixed-rate loans two years ago face an abrupt 69% surge in their monthly repayments, with an estimated 880,000 ultra-low fixed rates to expire in 2023.
This could see monthly mortgage repayments abruptly surge by 69% because of the fine print in the fixed-loan contract that stipulates that the borrower would move on to a “revert” variable rate that was 3.33 percentage points higher than the existing cash rate.
Mark Bouris, founder of Wizard Home Loans and executive chairman of Yellow Brick Road, said the RBA’s pandemic intervention was bound to create problems later. The federal government spent $300 billion on Covid welfare measures like JobKeeper and boosting JobSeeker unemployment benefits, which also contributed to the inflation rate.
However, the ultra-low rates funded by the RBA’s Term Funding Facility gave borrowers a buffer to deal with the cost of living crisis. Nonetheless, the worst inflation in 32 years has seen the RBA raise interest rates nine times in nine months, taking the cash rate to a 10-year high of 3.35%.
»Australians express their dissatisfaction with Scott Pape«
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