Interest rates on home loans might reach 8%

Interest rates on home loans for Aussies could increase by as much as eight per cent during 2011, according to an expert in the sector.

Speaking to the Herald Sun, chief economist at Macro Plan Australia Brian Haratsis said buyers at the bottom end of the market might be most affected.

He warned that some people could be faced with negative equity, adding that the impact might be felt across the whole of the property market.

“Australia is going to be extremely exposed between 2012 and 2015 because people won’t be able to afford to buy a house,” he said.

According to the expert, there could be at least two increases in interest rates this year, which might result in a freeze in the market.

His comments come days after Reserve Bank of Australia governor Glenn Stevens said he was not concerned about the current ratio of house prices to income.

Other economists insist that low rates are here to stay as the recovery remains weak and could be dealt a further blow if predicted public sector job cuts materialize. Official figures last week showed annual inflation as measured by the Consumer Prices Index had eased in July to 3.1% from 3.2% in June, but is still well above the Bank’s 2% target.

Tags: home loans, Interest rates on home loans

Posted by FinanceAZ on Apr 1 2011. Filed under Home loans. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry