RBA lifts rates by 0.25

The interest rate change
With the Australian economy continuing to push forward with signs of economic growth and a global revival starting to take shape, the RBA has raised interest rates for the first time since December last year. A 0.25 per cent increase was announced just minutes ago by the Reserve Board, taking the official cash rate to 4.0 per cent. A number of economic indicators have been improving over the last month helping influence the RBA’s decision to lift rates. The unemployment rate has decreased, business confidence has grown and retail sales were up for the start of the 2010.

Commonwealth Bank, ANZ, NAB, Westpac and St George have each increased standard variable home loan rates up by 0.25 per cent.

Looking to the future
Last month, RBA governor Glenn Stevens said that lending rates were around 0.50 per cent to 1.0 per cent below average, suggesting that more interest rates hikes are likely to come this year. As such InfoChoice expects the cash rate to be around 5 per cent come end of the year as the local economy prospers from a global recovery. Home owners will need to prepare for further interest rates hikes and higher mortgage repayments in the near future.

What you can do
One way borrowers can counteract some of the impact of rising interest rates is to check they have the most competitive mortgage for their needs.