Homeowners don't have to accept the new rate rise

Homeowners do not have to accept the latest rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages.
The standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent .
Basic loans were originally "no frills" loans, but are now quite flexible, but are designed for borrowers who only want to do is make the minimum monthly repayment.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt.
However, Craig James says the case for last week's increase was not overwhelming and any further lift in rates would create the risk of the economy going backwards.

A FALTERING RECOVERYProperty analysts say the 0.25 percentage point interest rate rise will dampen the recovery in residential property prices that has been under way since the end of last year.
Property prices in Sydney and Melbourne have not been rising but analysts say improvements in auction clearance rates and sales turnover were suggesting the worst was past. But the rate rise may put an end to that.
"The recovery that we were seeing is now going to stall and we think that the median house price in Sydney could fall by up to 5 per cent over this year and that prices in Melbourne will be flat over the year," says Louis Christopher, the general manager of Australian Property Monitors, which is owned by Fairfax, the publisher of this newspaper.
He thinks the price of units in the two cities will move in line with house prices.
John Edwards, the chief executive at Residex, says the Sydney property market is the "most fragile of the lot and is the most likely market to suffer" from the rate rise.
Edwards is not portending disaster, but rather that the rise will "put a hole in the upward trend that we have been seeing in the numbers in Sydney". He says the people most likely to suffer are those who entered the property market in the past year but were not careful about what they paid for their property.
Christopher says that when investors believe there is unlikely to be any capital gains (and rental yields are low), they are inclined to shift their sights elsewhere such as the booming sharemarket, where share prices have almost trebled over the past three years.
Borrowers do not have to accept the rate rise.
Home owners with mortgages do not have to accept last week's 0.25 percentage point rate increase. There are cheaper options for those prepared to look.
A home owner with a $300,000, 25-year mortgage can expect to pay about $50 a month more after the Reserve Bank increased interest rates to 5.75 per cent, the highest the cash rate has been since February 2001.
For those with mortgages of $500,000 the rate rise will add $81 to monthly repayments.
The effect of the rise is most immediately felt through the hip pockets of those with variable rate mortgages. But InfoChoice general manager Denis Orrock says it is not too late to take out a fixed rate loan for those worried their household budgets are coming under strain.
In October last year, the big banks were offering three-year fixed rates at 6.5 per cent. They have now risen to about 7 per cent, but that is still more than half a percentage point below the standard variable rate of 7.57 per cent.
Orrock points out that the standard variable rate is largely irrelevant because banks are discounting their variable rates, especially for consumers with larger loans.
He also says some of the "basic" loans offered by non-bank lenders have variable rates of about 6 per cent (see InfoChoice table for what you would pay for a 25-year mortgage). Basic loans were originally "no frills" loans, but are now quite flexible. However, Orrock says some have big exit fees for those leaving the loans within the first few years. Most basic loans will not allow extra repayments. "But if all you want to do is make the minimum monthly repayment these loans can be a good option," Orrock says.
Most people will probably be able to absorb the rate rise without too much trouble although it comes at a time of high petrol prices ($1.40 a litre and likely to go higher) and rising health insurance costs, well in excess of inflation. And it is not just mortgage debt that becomes more expensive - interest rates on credit card debt and all other debt such as personal loans and business loans increase.
CommSec's chief equities economist, Craig James, says: "There is no doubt that Aussie consumers will have to tighten their budgets, spend less at the shopping mall and attempt to pare back existing debt."

Source: Sydney Morning Herald