The base rate has been increased by a quarter of a percent in March to 4.00% – marking the first rate rise in 2010.
All four major banks have already followed suit by increasing the interest rates on their variable products. Mortgage brokers expected the major banks to follow the Reserve Bank’s rate rise so there was no surprise from the broker channel.
The Australian economy has been performing better than expected of late and is the only western economy to avoid recession during the Global Financial Crisis. Strong retail sales were reported in January and the property market has been performing ahead of expectation.
The latest rate rise is an attempt to curb spending and help ensure the economy doesn’t recover faster than is sustainable.
The increased cash rate will not come as welcome news for budding first time buyers. Housing affordability is already declining with the average home now worth more than four times the joint incomes of mortgage applicants.
The latest rate rise will only push more potential home owners away from achieving their dreams. It is widely expected that rates will continue to rise during the first half of 2010 as the economy continues to flourish.
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