 Mortgage rates set to rise again
Official interest rates have risen again, this time by 25 basis points. The pre-Christmas interest rate rise is set to add $50 a month on a $300,000 mortgage.
In a highly anticipated move, the Reserve Bank of Australia announced yesterday that the cash rate would increase to 3.75 per cent. The cash rate has been steadily rising since September, increasing from the record lows of 3 per cent seen during the global recession. The majority of economists and forecasters predicted another 0.25% would be added to the official interest rate this month, and their predictions were spot on.
It is expected that banks will match the RBA move and raise mortgage rates. At present, only Westpac has moved and increased mortgage rates, with all other banks saying they are reviewing their rates.
RBA Governor Glenn Stevens announced the rate rise and said that now the risk of serious economic contraction had passed the board felt it appropriate to move the cash rate up and decrease the amount of monetary stimulus that was rolled out during the worst of the economic crisis.
``These material adjustments to the stance of monetary policy will, in the board's view, work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead,'' he said.
When the RBA started raising rates in September, after holding rates at record lows all year, it was a clear sign local and global economies were improving. The emergentcy low cash rate that homeowners have enjoyed for most of this year was a tactic from the Reserve Bank to avert a financial crisis seen on large scales in the USA and in Britain.
But recently the trend is upwards, and home loan rates were increased in line with the official cash rate, and mortgage rates for fixed as well as variable rates increased, putting pressure on home owners, particularly first home buyers.
All eyes are now on the banks and other lenders to see how much home loan rates rise by.
With no meeting in January, the Reserve Bank next meets in February, so home owners at least have a bit of time to breathe and adjust to the increasing interest rates. The RBA Board will next meet on February 2.
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