Tighten That Belt: Loans Are Going Up
Illawarra Mercury
Thursday June 6, 2002
Home buyers will pay more on their mortgage repayments after being hit with another interest rate rise yesterday amid warnings there are more hikes to come.
In a widely expected move, the Reserve Bank of Australia (RBA) lifted its official cash rate to 4.75 per cent from 4.5 per cent, the second rise in as many months.
Major lenders started passing on the increase immediately, adding about $25 to monthly repayments on a typical 25-year, $160,000 mortgage.
Treasurer Peter Costello warned people should build a buffer into their home loans, as interest rates could not continue to stay at near record low levels.
``These are the lowest mortgage interest rates in 30 years and people would be misguided if they think you can just have the lowest interest rates in 30 years which keep on declining," he told ABC television.
``You can't expect interest rates to be at the lowest of 30 years and continue to decline. These are historical rates so build in a little bit of a buffer."
Economists forecast further rate hikes as soon as next month.
``We think another 25 basis point increase (to 5.0 per cent is) likely next month ... before the RBA continues on towards a peak of 6.0 per cent," HSBC chief economist John Edwards said.
Opposition Leader Simon Crean said families would be paying more in repayments as a percentage of their household income than they had for 15 years if predicted interest rate rises eventuated.
Illawarra Credit Union chief executive Mike Halloran said a decision would be made tomorrow about when to pass on the increase.
``But even with this latest increase the rates historically are still quite low. It will be a good bonus for our seniors and investors so there will be a little more equality with the rates now."
Mr Halloran said the Illawarra Credit Union was ``factoring in" the likelihood of at least two more rate rises before the end of the year, probably totalling at least .5 to .75 per cent.
``Even so, the interest rates are still at a 25-year low. Even if (rates) went up another .5 per cent the affordability of housing has never been as good."
IMB Building Society chief executive Wayne Morris said the IMB would meet today to decide when to pass on the increase. He expected further rate rises by the end of the year.
City Coast Credit Union chief executive Stephen Mayers said: ``We won't be moving our interest rates today.
``I'll try to leave our variable rate below our competitors' rates and if there is anything I can pass back to our members I'll do that as well."
Horizon Credit Union chief executive Simon Whiteman said the last interest rate rise of .25 per cent would not become effective for members until July 1. ``This latest increase will be reviewed and more than likely will also be passed on but we will hold off as long as we can. It probably will not be until August 1 ..."
© 2002 Illawarra Mercury