Optimism with RBA rates rise

YESTERDAY'S Reserve Bank of Australia (RBA) interest rate rise of 25 basis points to 3.25 per cent may be earlier than expected, but not as alarming as some may have anticipated.

Managing partner for National Australia Bank business Wide Bay Peter Tuffield said a strong motivation for the rise now was probably concern over underlying inflation, but in comparison to the world market Australians were not so bad off.

“The bottom line is, home loan rates are still the lowest in (his) nearly 30 years of banking, so it's still good,” he said.

“It's all about confidence.”

Read more about the RBA's rate rise.

Mr Tuffield said confidence was key - confidence that people, for example, would have the long-term employment to pay off a home.

He suggested concerns about “a bubble in the housing market” meant the RBA were trying to control growth for the next 12 to 18 months.

“Most people are at 5.25% on home loans - that's pretty cheap,” Mr Tuffield said.

“And unemployment is not looking as bad as they thought.”

McColms First National Real Estate principal Heather Galley was also confident the quarter of a per cent rise would not be too difficult to live with.

“The market might stutter for a few days, but won't make all that difference,” she said.

“The market has been quite buoyant - October was a huge month.”

However, while federal treasurer Wayne Swan said a rate rise will make it tougher for families, he also said it was important to remember rates had been at emergency levels, which were aimed at stimulating the economy.

Mr Swan said home owners and businesses understood the need for appropriate interest rates.

“They do know that 50-year lows can't last forever,” he said, adding home owners had saved a bit while rates were low and could absorb some higher costs as rates rose.

Read more about the RBA's rate rise.



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