Interest rate increases hurting

Reporter: David Richardson

Home owners are facing higher mortgage repayments after the Reserve Bank lifted the official interest rate to 4.5 per cent.
The increase today is the third rate rise in a row, following an official cash rate hike of 25 basis points in April.
Economists claim a surge in housing prices and rising inflation fears are the motives behind the latest hike, which marks the sixth increase in just six months.The rise will add $45 per month to an average $274,000 loan.

CommSec economist Savanth Sebastian claims that the various interest rate hikes have failed to scare off buyers. "It clearly highlights that the housing sector overall has probably taken the immediate rate hikes in its stride," he said. "Property prices are still seeing strong growth and it's important to realise that this isn't going to be solved by raising interest rates."

Financial author and advisor Ed Chan thinks the Reserve Bank has got it wrong."All it does is hurt average Australians," he said.
"It's a band aid solution and it's not addressing the problem."The problem is a shortage of supply. "The banks won't lend to developers and the government's not releasing any land." This latest hike makes us one of the most expensive countries for loans. Japans asks 2.37 per cent for a home loan while England offers average mortgages for 2.99 per cent.

Tips to save on your mortgage
All forms of family income should be deposited directly into the mortgage. Payroll, your wages come through on a fortnightly or monthly basis that should be directed straight into the mortgage account.
If you are making monthly repayments you can reduce that down to fortnightly or weekly payments, it is amazing how quickly the mortgage reduces.
If you have credit card bills outstanding and they are spinning at a rate around 13-14 per cent, pay off the highest form of interest first.