RBA Lifts Rates 0.25% – Banks Follow Suit
As predicted by all and sundry the RBA moved to lift official rates by 0.25%. The announcement came on Wednesday morning following the RBA meeting on Melbourne Cup day with the outcome being picked by a hell of a lot more than the winner of the Cup.
In announcing the rise the RBA Governor Ian Macfarlane quoted higher than expected domestic growth, concerns of inflation going up and global growth being a good deal better than expected as the reasons behind the move.
The pre-emptive move by the RBA is consistent with its policy of looking to the future and not being caught in a reactive catch up situation which would force a major rate adjustment. Bearing this in mind further rate rises over the next 12 months is a definite possibility, especially considering the likely inflationary effects of the arrival of the GST, income and company tax cuts, proposed amendments to capital gains tax and the impact of the Olympics on the labour markets.
However, before people start panicking with concerns of rates going up to levels like that seen in the late 80’s and early 90’s we are now only looking at a series of potential increase’s of 0.25%, totalling no more than 1% over the next year. And that includes this latest rise of 0.25%.
In response to the move by the RBA, lenders have started to adjust their variable rates to borrowers with the NAB, Commonwealth and the ANZ lifting their standard variable home loan rate from 6.55% to 6.80%, matching the 0.25% official rate increase. For the average borrower with a loan of $100,000 over 25 years this means a monthly repayment increase of $15.74. If you want to find out what effect the rise will have on your mortgage in terms of extra repayments or for those who pay more than the monthly minimum how much longer it will take to pay it off, then check out the calculators section of www.bankchoice.com.au.
Now that the “big boys” in the market have declared how much they are moving we expect the others to soon follow. When we receive this information we will provide an updated summary of who’s moved, by how much and when it is effective for both new and existing borrowers.