Australia’s big four banks say they will hold standard variable home loan rates steady after the central bank left the official interest rate unchanged on Tuesday, a move which surprised most economists.
The central bank decided to leave the rate unchanged and the major lenders hiking the rates by more than the last reserve bank rate rise has been one of the reasons why.

The Reserve Bank of Australia (RBA) left the official interest rate unchanged at 3.75 per cent on Tuesday. This is good news for our borrowers as people need a breather from their Christmas expenses and many borrowers are struggling with their mortgage repayments at the moment.
As a broker we can still find borrowing solutions for people finding it hard to cope or are struggling with repayments so please do not hesitate to contact us and discuss your situation, our advice is free.
A home loan health check once or twice a year is always a good idea. Cheers to a prosperous 2010.

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More than 75 per cent of homeowners took advantage of low interest rates to add to their mortgage loan or take on other forms of debt, a new survey has found.

The poll by mortgage broker, Loan Market Group, found that 44 per cent of homeowners increased their home loan while interest rates were at their lowest in nearly 50 years.

One in 10 added to their credit card debt, slightly fewer took on a personal loan, and the same number made a purchase on interest-free terms, while seven per cent borrowed from their relatives.

Just 23 per cent were prudent in not taking on any more credit.

The increased debt burdens were of concern now the Reserve Bank of Australia (RBA) was raising the cash rate, Loan Market Group chief operating officer Dean Rushton said.

“Many Australians have borrowed more while the RBA reduced interest rates to near record lows of 3.0 per cent in response to the global financial crisis,” he said releasing the survey on Wednesday.”

“Hundreds of thousands of Australians are in greater debt than they were a year ago so any increase in interest rates will hurt.”

The central bank raised the cash rate for a second month in a row on Tuesday, lifting the cash to 3.5 per cent.

Economists are divided over whether the RBA will raise rates again in December, but they anticipate further moves in 2010 towards a cash rate of five per cent.

Still, the survey of 600 respondents found people without a mortgage were more careful with their budgets, with 39 per cent saying they took on no new debt when rates were in the trough.

However, 22 per cent borrowed from relatives, 16 per cent added to their credit card debt, 13 per cent took on a personal loan and 10 per cent made an interest-free purchase.

Quoted from Lending Central website

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It would be wise to budget for further rate rises. When the interest rates hit an all time low, lenders were more generous on their serviceability calculators which meant that they were allowing the borrower to lend more money as the rates were low. As the rates steadily increase this obviously adds to higher repayments (unless you are on a fixed rate)

A lot of borrowers do not plan ahead and do not allow for the increase in repayments hoping that the rates will not go up. There are many factors that decide on rate increases and some of them can be outside the economists and financial guru’s predictions (just look at what happened last year with the global financial crisis)

Always try and plan ahead and do not lend more than you are comfortable at repaying your mortgage on a buffer of 0.5% or even 1% higher than your current interest rate.

Life is unpredictable and job loss, sickness and the economy can sometimes be totally out of your control.

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