Buyers brace for another rate hike

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Home buyers and home owners could be lumped with another interest rate increase in December.

The Reserve Bank has already lifted the official cash rate by 25 basis points twice over the past two months, after it became evident that the Australian economy was improving.

In the minutes of its November meeting, released yesterday, the Reserve Bank talked of the need for the gradual adjustment of its cash rate, heightening the likelihood of another rate hike next month.

“Looking ahead, members expect that if economic conditions evolve as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remains an open question,” the minutes read.

NAB’s chief economist Alan Oster said he expected the Reserve Bank to raise the official cash rate by 25 basis points each month until March 2010.

“I expect the Reserve Bank to lift the official cash rate to 4.25 per cent by March 2010,” Mr Oster said.

“After this, I expect the Reserve Bank to pause for around six months before delivering progressive 50 basis point rises until rates are back to neutral.”

 

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