At its meeting today, the Board decided to raise the cash rate by 25 basis points to 4.5 per cent, effective 5 May 2010.

Mortgage holders will be disappointed with the increase but the RBA said with the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more. The Board expects that, as a result of today’s decision, rates for most borrowers will be around average levels.

It is the sixth increase since September and this means mortgage holders are now paying about $295 a month extra for their mortgages than they were late last year.

Mortgage holders would have felt a bit hard done by with this increase as there was a case for not lifting the rates at all as consumers have been spending less at the shops and felt the other interest rate rises needed time to take affect.

What you can do
One way you can counteract some of the impact of rising interest rates is to check that you have the most competitive mortgage for your needs. Try our Mortgage Report Card and compare all your options and find a cheap mortgage, it’s totally free.

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