Interest Rates

Reporter: Chris Simmond

Today's interest rate rise, record high petrol prices and private health insurance increases are causing a lot of financial pain for Australians.

The Reserve Bank of Australia (RBA) raised the interest rate by 0.25 per cent today in another blow for Australian families, who just one year ago were paying 20c per litre less for petrol and 6 per cent less for private health cover. Finance commentator Michael Pascoe said today's rate rise is a message that the RBA thinks we are spending too much and having a good time. "The Reserve Bank and petrol prices are taking away Peter Costello's tax cuts before you even feel them," he said.

"For most people it's a pretty good idea to take out insurance effectively by fixing half their mortgage at anytime and with the money market tipping another interest rate rise down the track it is probably a good idea." Real estate agent Neil Jenman fears families forced to sell their homes will become more common in the months ahead as a result of today's rate rise. "They have not been giving themselves any buffer space, they go to a bank and say how much can we borrow? And they borrow to the max," he said."Fixed rates are something that are done through out the world, the variable rates are an Aussie tradition, just don't do it, get a fixed rate, even if it costs you more, it is the peace of mind that you want," he said.

Example
A fixed loan compared to variable for the average home loan of $300,000 is a saving of $91 per month.

So for 3.2 million households looking for relief, mortgage analyst Dennis Orrick from Infochoice believes there are savings to be made by locking yourself into a fixed

interest rate. "Fixed rate loans have been well below the standard variable rate for over 18 months now as a whole," he said."That trend looks set to continue.".