Mortgage interest rates are forecast to keep rising

How things change in the mortgage rate speculation!
A key analyst is now predicting interest rates will rise in the first week of April and again within 12 months, which would hit hard Australians on lower incomes.
“On balance it now looks likely that the Bank will raise rates by 0.25 basis points following its April 3 Board meeting,” said Westpac Bank’s chief economist Bill Evans today in a research note. Any decision would be announced to the public on April 4.
The central bank raised interest rates three times last year, with November’s rate rise of 25 basis points taking official interest rates to a 6-year high.
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According to Mr Evans, the pain to households will continue into next year and rates would rise even more.
“A rise in interest rates in April or May would not mark the peak of the cycle. We expect that the Bank would be prepared to go on hold for the remainder of 2007 to assess the cumulative impact of four rate hikes over a full year.
“However, we expect that the factors pushing up inflation over the last year would remain apparent through the second half of 2007 leading to a further move by early 2008.”
Recent economic data suggests wages growth remains robust and economic growth remains “relatively growth”.
The RBA sets interest rates to keep inflation between 2 and 3 per cent and strong economic growth pressures inflation higher.
The Aussie dollar has surged over US80 cents and bond yields have gone up in expectation of another rate rise. The Australian bank bill futures market yesterday put the chance of a rate rise at the next Reserve Bank board meeting at 50 per cent, while a rate hike in the next 12 months is considered a certainty.
People on lower incomes and Australians up to their ears in debt would be hurt particularly by another rate rise.
Bank repossessions of properties are rising around Australia, especially in lower income areas such as Sydney's and Melbourne's outer suburbs.
Property investors who also bought at the peak of the boom of 2003 have also been stung by higher interest rates and some home owners are now in a position where their mortgage is worth more than their home, or they hold "negative equity".
Source: NEWS.com.au