Borrowers warned of interest rate hikes by late-2014

By the end of the year borrowers will be facing higher interest rates and higher resulting costs, finder.com.au is warning.

While a recently survey of economists and banking experts predicts the Reserve Bank will keep the cash rate on hold tomorrow, almost half of the 11 surveyed expect the rate to rise in the last quarter of the year.

Those who tipped an increase suggested that the rise might be on Melbourne Cup Day, with experts from Commonwealth Bank, Commsec, HSBC, ING Direct and St George Bank agreeing with a late-year increase forecast.

Money expert at finder.com.au Michelle Hutchison, said investors should plan now.

“If the official cash rate does increase by the end of the year, it’s likely that we will see home loan interest rates start creeping up before then,” she said.

“So if you’re an existing borrower, it’s a good idea to review your budget and factor in higher costs now, before interest rates rise.”

Hutchison reminded those looking to buy to factor in a buffer for if interest rates do increase.

“It’s great to see that borrowers are confident during this time of stability and are taking advantage of low interest rates by jumping on the property ladder or refinancing their home loan. Despite the finder.com.au survey showing rates aren’t likely to move until at least the end of the year, now is the time to plan for a rate rise,” she said.

The recommended buffer to factor in is for two percentage points in upwards movements, or for a $300,000 loan – an extra $400 per month.