Save Money Despite The Interest Rate Rise

Thursday November 8, 2007

As expected, the Reserve Bank of Australia (RBA) raised official interest rates to 6.75% after their board meeting on Melbourne Cup Day. What does this mean for everyday consumers apart from the obvious, your home loan monthly repayments will now cost a fraction more each month.

Home loan repayments will go up. The RBA intimated that this wouldn't be the last of the interest rate rises with another tipped for March 2008.

Australia's growing economy, low jobless rates and high exports is great for Australia but it is not great news for those wanting to borrow or have an existing home loan.

Commonwealth Bank of Australia boss Ralph Norris said that the (CBA) would be passing on the latest interest rate rise to its customers shortly. When Mr Norris was asked if Australia's biggest lender would raise rates higher than the official interest rate rise he wouldn't rule it out.

"We have not made a decision in that regard,'' Mr Norris said.

So now everybody will be paying an extra $20-$100 each month depending on the size of their home loan.

Those aren't really the sort of figures that would hurt most people but with another rise forecast in March and let's presume another just in time for Xmas 2008, those who have borrowed to their maximum can quickly find themselves feeling the financial strain of interest rate rises.

In years gone by the banks have generally taken a week to implement any official interest rate rises, don't expect them to give you a weeks grace this time around with rates expected to be up before the end of the week.

In recent times the banks have had to absorb the higher costs of funding loans and have resisted the temptation to pass those costs on to their customers.

You may find that your lender may use the official interest rate rise as an opportunity to lift interest rates higher than the RBA rate.

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