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Interest rates will rise

Interest rates will rise

21 May, 2011 - 2 min read

May 21, 2011

In the period from October 2009 to November 2010, Australian homeowners were hit by seven interest rate rises but since Melbourne Cup Day last year, the official cash rate has remained steady at 4.75 percent. But the honeymoon is about to end, according to finance experts.

Commonwealth Bank CEO Ralph Norris predicts one, or possibly two, rate rises before the end of the year and said these would translate to home loan interest rates. Both JP Morgan and St George were predicting August as the most likely time for a rate hike.

The Reserve Bank of Australia’s (RBA) recent quarterly statement on Monetary Policy stated higher rates were “likely to be required at some point”. Factors placing pressure on interest rates include the RBA’s expectation that inflation will reach 3 percent by December – one year earlier than anticipated; the acceleration of the resources boom; Queensland’s natural disaster rebuild and increased pressure on the labour market.

However, there is light at the end of the tunnel for homeowners. Citi chief economist Paul Brennan has predicted that although official interest rates will rise before the end of the year, they will not continue to do so significantly over the next 12 months.

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This article is over two years old, last updated on May 21, 2011. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.

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Laine Gordon

Head of Public Relations

Laine Gordon is the Head of Public Relations at RateCity and an experienced journalist and research specialist. With a background in news and feature writing, covering finance, media and even food (a passion of hers) at Reed Elsevier publications, Laine brings almost two decades of experience to the team. Having covered major areas of interest to the general public from hip pocket issues to rising and falling interest rates and the impact to mortgages, credit and saving in Australia, she is passionate about researching and telling people’s stories to help others make better decisions about their own finances.