Economists 'expect interest rates to hit 5.25 per cent in 2011'

Most economists believe that interest rates in Australia are likely to reach either five or 5.25 per cent by the end of 2011.

These were the findings of the June quarter Economic Outlook Survey conducted by the Australian, which may suggest a rate rise in the near future is imminent.

Currently, the cash rate stands at 4.75 per cent, the same level it has been throughout the year.

The last increase was in November, when the Reserve Bank of Australia (RBA) pushed interest rates up 25 basis points.

According to the survey by the Australian, economists believe the rate at which arrears on home loans increases will be proportional to action taken by the RBA.

However, as mortgage rates rise, there could be good news for prospective home loans customers as JPMorgan economist Ben Jarman revealed the firm is forecasting a "moderate deterioration in dwelling prices this year with higher mortgage rates forcing a realignment with historical income multiples".

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