The Barefoot Investor has slammed a homeowner for borrowing too much money from the bank and blaming the Reserve Bank of Australia boss for his woes.
Scott Pape issued the scathing takedown to homeowner Ben after he revealed he was considering legal action against Philip Lowe.
Ben said he had taken out a hefty loan and based his decision on forecasts made by Dr Lowe in 2021 where he predicted interest rates would stay at record low levels until 2024.
Interest rates were increased for the ninth consecutive time in February raising the cash rate to 3.35 per cent, leading to more financial pain for borrowers.
Mr Pape agreed with Ben that the RBA boss should be held accountable and ‘benched’ for the disastrous rates forecast but told the homeowner to take responsibility for his actions.
‘Barefoot Investor’ Scott Pape has brutally shut down a reader who blamed RBA boss Philip Lowe for his decision to borrow heavily when rates were at record lows
‘Did you really base a significant long-term financial decision on a relatively short-term prediction from the Reserve Bank?’ Mr Pape wrote in his Sunday Column for the Courier Mail.
A fired-up Ben had written to Mr Pape saying the RBA boss needed to take responsibility for his actions.
‘How can the head of the RBA make unequivocal statements (not predictions) that interest rates will not rise until 2024 and then wash his hands and take no responsibility for the trauma (financial and mentally) his words have caused?’ he wrote.
He said because he borrowed the money on the basis of that forecast he was in ‘serious financial stress’.
Ben said he had approached his lawyer to determine his legal options, saying he would ‘willingly join in any class action that might be looming’.
Pape replied that he thought Dr Lowe had ‘stuffed up right royally’ and as a consequence he should be ‘benched’.
He pointed out that the fuller RBA statements said there was incredible uncertainty around Covid and the world economy, which is why Dr Lowe should have put ‘his crystal ball away’.
However, Pape said most people had just listened to the media amplifying Dr Lowe’s soundbite’ and that same media were now calling for ‘his head’.
‘It’s not financial advice, it’s financial porn, plain and simple,’ he wrote.
‘Look, no one put a gun to your head and told you to borrow too much money when interest rates were at their lowest levels in recorded history.’
Dr Lowe (pictured) was forced to defend himself and the Reserve Bank’s actions in rapidly hiking rates during parliamentary hearings
Appearing before Parliament this week, Dr Lowe warned that rate rises weren’t done yet, despite him admitting it’s ‘really, really tough’ for borrowers.
The RBA governor told a Senate hearing in Canberra this month’s ninth consecutive increase – taking the cash rate to a 10-year high of 3.35 per cent – would be far from the last.
Philip Lowe faces being shortest serving RBA boss since 1996
Philip Lowe’s seven-year term ends on September 17 and if it’s not extended, he will be Australia’s shortest-serving RBA governor since Bernie Fraser’s seven-year term ended in September, 1996.
That’s when John Howard’s Coalition government declined to extend his tenure that had covered an interest rate-induced recession.
Dr Lowe was appointed for a seven-year term in May, 2016 when Scott Morrison was still treasurer.
His Reserve Bank predecessors Glenn Stevens and Ian Macfarlane both had 10 years at the top.
They are also the only RBA chiefs not to have presided over a recession since the Reserve Bank first published a target cash rate in 1990.
He warned more pain was necessary to avoid a repeat of 1990 when RBA rates were at 17.5 per cent.
‘There is a risk that we have not yet done enough with interest rates and spending is more resilient and that inflation stays high,’ Dr Lowe said.
‘If inflation stays high, it’s very damaging for the economy, it worsens income inequality, it makes it harder for businesses to plan, it erodes the value of people’s savings, it’s corrosive for the economy.’
Variable rate borrowers are already enduring a 43 per cent increase in their monthly repayments during the past nine months.
With fixed rate borrowers facing a 65 per cent surge in 2023, Dr Lowe acknowledged it was ‘really, really hard for some people’ who would have to battle ‘a very big increase in their mortgage payments’.
Dr Lowe noted that unlike politicians, he could make unpopular decisions to tackle inflation, which is running at 7.8 per cent.
‘It’s easier for me to do unpopular things than it is for some of you,’ he said.
‘When we’re raising interest rates… it’s unpopular in large parts of the community, particularly given the history of the lower interest rates over the years.
‘It is unpopular and it’s the job of the central bank to do what’s unpopular in the national interest and that’s what we’re doing.
‘If we don’t get on top of this, the pain will be worse.’
The RBA governor told a Senate hearing in Canberra this month’s ninth consecutive increase – taking the cash rate to a 10-year high of 3.35 per cent – would be far from the last (pictured are houses at Oran Park in Sydney’s south-west)
But Dr Lowe, who is on a $1,037,709 remuneration package, said he understood borrowers were doing it ‘really, really tough’.
‘I read those letters and hear those stories with a very heavy heart,’ he said.
‘I find it disturbing. People are really hurting, I understand that, but I also understand that if we don’t get on top of inflation it means even higher interest rates and more unemployment.’
Dr Lowe said he intended to serve out the remainder of his seven-year term, which ends on September 17 despite calls for him to resign for suggesting in 2021 interest rates would stay on hold until 2024.
‘It’s an important job that comes with public accountability as part of that process.’
The board he leads voted on Tuesday last week to raise the cash rate for a ninth successive month to a new 10-year high of 3.35 per cent, adding another $93 a month to repayments on an average $600,000 mortgage.
The typical Australian borrower with a 30-year loan is now paying 43 per cent or $997 more a month on their variable home loan compared with early May last year.
Their annual repayments are already $11,964 higher than they were nine months ago, despite Dr Lowe vowing in 2021 to keep interest rates on hold at a record-low of 0.1 per cent until 2024 ‘at the earliest’.
Dr Lowe said it would be ‘unwise’ and ‘completely crazy’ for the government to intervene to reverse his latest rate rise, with average variable rate borrowers already enduring a 43 per cent increase in their monthly repayments during the past nine months