More Doom For Borrowers

Nov 09, 2009 - Eric Smyth

Based on their interpretation of the latest forecasts from the Reserve Bank economists are predicting interest rates are likely to be 1.5 per cent higher by the end of next year.

If interest rates rise by that much borrowers with an average mortgage of $419,000 will need to find an extra $100 a week.

New research has shown that there are more people in that position, due to home loans rising sharply.

The RBA's quarterly statement on monetary policy released on Friday has indicated rapid rate rises are on the cards.

The RBA is now expecting economic growth of 1.75 per cent in calendar 2009 and 3.25 per, cent next year. Its previous statement tipped growth of just 0.5 per cent this year and 2.25 per cent for next year.

These changes are due to stronger economic data since August and an improved outlook for the local economy.

This promising outlook suggests that the RBA is likely to remove the support it has been extending to the economy via lower than usual interest rates.

Economist Craig James has stated that the economy has become far more sensitive to higher interest rates with the proportion of people owning their homes outright continuing to slump.

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