Home owners around Australia will be tightening their belts after this weeks official rise in interest rates, which has pushed up home lending rates to four-year highs. The Reserve Bank of Australia (RBA) raised official interest rates to 5.75 per cent from 5.50 per cent this week, taking the standard variable home loan rates to 7.57 per cent from 7.32 per cent.

While many lenders have yet to announce rises in their mortgage rates, they will come as sure as daylight in coming days as bank and non-bank lenders seek to maintain profit margins on home loans.

But there was more bad news this week. Analysts have warned that the RBA could raise rates again before the end of the year.

Another 0.25 per cent rate rise would come as a blow to many home borrowers. Standard variable rates could jump to 7.82 per cent by the years end, further pushing up home loan repayments.

Property prices could tumble - especially in Sydney, where home owners are most exposed to interest rates due to high property prices and relatively large mortgages.

For would-be home owners, the message is not to pay too much for your home and not to rush into property purchases. The chances are that house and unit prices could fall in coming months if rates rise again, so it might be worth waiting before you jump in and buy a home.

Tips for people with loans:

* If you have a mortgage already, its important to take steps to reduce your interest costs. You can do this by repaying any extra income you have into your mortgage or pay it off if you can. Repay in fortnightly instalments rather than monthly because this will save you substantial amounts in interest costs.

* If you have a fully-featured home loan, you might want to think about refinancing to a cheaper home loan without the bells and whistles. And make sure you repay your mortgage on time to keep your credit record clean.

* Credit card and Personal Loan debt will also add a further burden so considering consolidating all of your debt into your home loan, is at least worth a call.

* People with Business, Commercial or Development loans should take the opportunity to ensure they are on the best rates and terms they are eligible for by contacting Chocolate Home Loans for an obligation free debt health check.

TAKE ACTION NOW and contact your Lending Consultant or Mortgage Broker directly.

About the Author