Australians have been hit with a 0.25 per cent interest rate rise today, following the Reserve Bank Board’s meeting.
The increase could be the first of three or four rises to come this year. The Reserve Bank has indicated it intends to raise rates now that the economy is picking up.
“The news is double-edged,” says Domain.com.au blogger and property writer Carolyn Boyd. “Home owners will be paying bigger mortgages, but at the same time the rise is a further sign the economy is improving and people can feel more secure in their jobs.”
The 25 basis point rise takes the official interest rate to 4 per cent. The rate has many more rises to go before it reaches the most recent peak of 7.25 per cent, which it hit two years ago, in March 2008.
Until today’s decision, mortgage holders on variable interest rates were paying about 6.5 per cent, and rates are expected to normalize at around 7.5 per cent by year’s end. Boyd suggests mortgage holders look ahead at what their rate could be at the end of the year, and add another 0.75 per cent or 1 per cent onto their repayments now if they can afford it.