Following the Reserve Bank’s decision to lift official interest rates by 0.25 per cent to 3.25 per cent, some industry experts are urging homeowners to refinance.
The rise will increase payments by around $41 a month for homeowners with a $300,000 mortgage, while those with more expensive loans will be paying much more: an $850,000 loan will see an average monthly payment increase of around $116.
While the rate increase will likely put more mortgage stress on homeowners, RBA governor Glenn Stevens said the need for such a low interest rate setting has now passed.
“With growth likely to be close to trend over the year ahead, inflation close to target and the risk of serious economic contraction in Australia now having passed, the board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy,” he said.
“This will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead.”
To battle the rise, Aussie Home Loan chairman John Symond suggested home owners and credit card holders should investigate their own financial situation and seek to offset the hike in the interest rates, which will hit their mortgages and other loans.
He said, “Our research shows that more than 50 per cent of customers who speak to an Aussie adviser do not have the best home loan deal. The rate rise should prompt all borrowers to find a better deal, which could negate the latest rise altogether”.
As some experts consider the rate rise a signal of Australia’s recovering economy, homeowners might soon feel the burn.