The bad news of the day is that the RBA has increased its cash benchmark
rate by 25 basis points (to 4.25%).
The RBA has been spooked by real-estate data indicating an Australia wide increase in property prices.
Making it hard to borrow or hard to repay is one way to curb home owner or prospective home buyer enthusiasm.
So what can we do? Already Australia’s biggest home lender the Commonwealth Bank, has announced that it will increase its variable rate by the .25% starting this Friday. The rest of bailed out banks will no doubt follow suit in the days ahead.
Try and pay off all your loans and credit cards as quickly as possible. Chop up your card if you can, or at least take some time to understand how a debt consolidation loan may help. Sell your second car, car pool or take the bus. Switch to Naked DSL instead of a land telephone line. Search for a cheaper power supplier or embrace solar energy. Put in a water tank. Grow a veggie garden. Start jogging instead of going out. (You can meet some really interesting people jogging on the beach.) Brew your own beer. Get the idea? I think we are headed for a big recession, but the RBA thinks it has some divine providence after it flukes the idea of dropping of interest rates in 2008 and 2009.
Better to be ready, and who knows, luxury items and big TV’s may be cheaper next year.
Foot note: When rates go up banks make mistakes. Check your Home loan statements