Currently NAB already have the lowest variable interest rates at 6.74% followed by Commonwealth Bank at 6.84%, then ANZ at 6.91% with Westpac grabbing a greedy 7.01%

“With the risk of serious economic contraction in Australia having passed, the Board moved late last year to lessen the degree of monetary stimulus that had been put in place when the outlook appeared to be much weaker. Lenders generally raised rates a little more than the cash rate and most loan rates rose by close to a percentage point.”

With todays increase, the payments on the average mortgage of $300,000 will rise by around $50/month. It is expected that rates may rise three to four more times by the end of this year, taking the official cash rate to around 5.0%. Of course, if the banks take matters into their own hands by claiming higher borrowing costs and raising by a larger amount than the RBA, this would also significantly affect monthly payments also.

Unemployment doesn’t seem to have hit the levels that were predicted, and stimulus package payments have kept quite a measure of confidence. Coupled with continued dwelling price growth over the last 6 months, the board though it prudent to lessen the stimulus provided by monetary policy to help sustain growth at a consistent level whilst keeping inflation in check.

“Economic conditions in Australia have been stronger than expected a few months ago, with both consumer spending and exports notable for their resilience. Measures of confidence have recovered a good deal of ground. This suggests that the risk of a severe contraction in the Australian economy has abated. The most likely outcome in the near term is a period of sluggish output, with consumer spending likely to slow somewhat and investment remaining weak. Stronger dwelling activity and public spending will start to provide more support to overall demand soon, and growth is likely to firm into 2010.”

Businesses still appear to be holding off on any spending and/or investment that involves borrowing, but with slightly easing commodity prices and an increase in dwelling prices, no doubt due to the extended First Home Owners grant, there seems to be a reasonable balance at present.

All of the fixed term mortgage rates offered by Westpac have risen by between 0.4-0.45 percent, with the exception of 1 year rates, which have only risen by 0.10 percent.

This would indicate that Westpac are definitely expecting the official cash rate to rise before the end of this year, and possibly even by 0.5 percent over the next 12 months.

With fixed rates still at a differential of around 2% from variable mortgage rates, it is by far still better to go for a variable mortgage, but moves like these from the big banks are showing that if you want to be sure you won’t be paying a vast amount more in repayments in the next three, four or five years, you really should be considering a 5 year fixed term now, before they rise even further.

The Commenwealth bank hiked rates by point three of a percent, only to have the government in an uproar… but Westpac yesterday managed to push up 1 and 2 year fixed rates by point one and point two percent respectively, and a WHOPPING point five percent increase on all interest rates fixed for three years or longer, making CBA look kind.

This is obviously a sign that they believe rates will be heading higher before the end of the year

“Evidence has continued to emerge that the global economy is stabilising, after a sharp contraction during the December and March quarters. The considerable economic policy stimulus in train in most countries is helping to contain the downturn, and should support an eventual recovery. The turnaround is clearest in China and some other emerging countries. Recovery in the major countries is likely to take longer to begin and be slower when it does occur.”

Some had predicted that there may be a change of .25 per cent due to a sharp decline in inflation from last month, but other factors have balanced this out.

“This offer gives existing CBA customers a low 4.99% p.a. interest rate on all purchases for 9 months across the Low Fee, Awards, Gold and Platinum cards”

Good news for those who are now using their credit card on a day to day basis for necessary purchases. We should note however that this rate applies to existing CBA customers who are applying for a new credit card

In doing so they have recognised that the country is doing better than some of its counterparts around the world, with economic stimulus still to show any benefit in some countries.

They have also noted that there has been a slight rise in owner-occupier finance, possibly due to the increase in first home buyers grant as the increase seems to have affected lower priced homes only.

The full media relase statement can be viewed here.