Neobank CEO urges borrowers to build buffer

Borrowers should resist the urge to take on more debt and build a buffer to guard against the continued weakness in the economic environment, according to the CEO of a challenger bank.

Co-founder and CEO of Xinja Bank Eric Wilson has said that the Reserve Bank of Australia’s decision to hold the official cash rate at 1.5 per cent should not deter borrowers from attempting to pay off their debts and building a financial buffer as a protection against continued weakness in the economy.

“While it’s tempting to borrow when rates are this low, borrowers should accelerate debt repayments if they can, to build a buffer against signs the economy is slowing,” Mr Wilson said.

“Rates this low, even without an official cut, mean the economy is sluggish and there’s little or no inflation.

“Our advice is to get yourself in the best position to deal with lower economic growth and the possibility of lower jobs growth by cutting your debt as much as you can.”

The RBA’s decision to hold the cash rate took some analysts by surprise, with continued weakness in the credit and housing market, high household debt levels, and a flat inflation rate prompting calls for economic stimulus.

However, Mr Wilson said that Xinja’s lending strategy would not be beholden to market trends.

Xinja, which currently holds a restricted banking licence, is planning on launching its own loan products upon its receipt of a full banking licence from APRA.

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Source: Neobank CEO urges borrowers to build buffer – Mortgage Business