Home loan rates expected to rise by at least 1% in 2010

Thursday 24 December 2009

Article by Mozo

Home loan rates are expected to rise by at least one percentage point next year, the Australian Associated Press (AAP) reports.

Economists predict that the Reserve Bank (RBA) will raise interest rates at least once by March next year before pausing to assess the economic impact of its rate rises since October, the news provider said.

On December 1st, the RBA increased the cash rate by a further 25 basis points to 3.75 per cent. JP Morgan economist Helen Kevans said that the central bank would continue to finely balance interest rates as the economy grows. She predicted that there would be another 25 basis points rise in February, up to 4.0 per cent.

"The RBA will continue tightening, yet it would not be surprising thereafter if the RBA takes a breather and sees how the economy reacts to those interest rate hikes," she told the AAP.

A one percentage point rise on a current standard variable rate mortgage of $300,000 would raise monthly repayments by $203, while half a percentage point increase would be $101, the news provider added.

Such predictions will encourage bank customers to compare home loans. This week Lisa Montgomery, head of consumer advocacy at Resi Mortgage Corporation, told the AAP that people with high credit card limits are less likely to be approved for a home loan.

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