Interest rates to be 1.5 per cent higher

Article Category: Interest Rates

By John Rolfe, The Daily Telegraph, 7 November 2009

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

A rise of that size would leave a family repaying an average mortgage of $419,000 needing to find an extra $100 a week.

And there are more and more people in that position, new research shows, with the proportion of households with a home loan rising sharply.

The predictions for rapid rate rises reflect the RBA's quarterly statement on monetary policy, released yesterday.

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 next.

The RBA said the changes reflected stronger economic data since August and an improved outlook for the local economy.

The rosier outlook suggests the RBA is likely to remove more rapidly the support it has been extending to the economy via historically low interest rates.