Home owners to 'brace for rates hike'

Posted @ Sep 1st 2009 4:04pm - By GCPN Property Network
News 128

Home owners should brace themselves for a jump in the mortgage repayments of over $5,000 a year over the next 18 months, a mortgage broker has warned.

While economists expect the Reserve Bank of Australia (RBA) to leave the official cash bank unchanged at a 49-year low of 3.0 per cent at Tuesday's monthly board meeting, the central bank has warned it will need to raise the rate to "a more normal" level at some stage.

Loan Market Group executive director John Kolenda says homeowners can expect variable mortgage rates to rise by around two per cent over the coming 18 months.

"Don't get accustomed to such low rates and get prepared for eventual rate increases," Mr Kolenda said in a statement.

"Even Reserve Bank Governor Glenn Stevens has warned consumers to allow for a two per cent increase in the future which would see variable rates at around 7.8 per cent.

This he says would still leave home lending rates slightly below historical medium levels of 8.0 to 8.5 per cent.

But a 200 basis point increase would add about $450 to monthly mortgage repayments, or some $5,500 a year on an average home loan of $340,000.

Mr Kolenda said while the surge in rates won't happen overnight, he said homeowners should be aware of the potential impact on budgets and lifestyle.

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