news

US debt ceiling to impact Aussie rates

By Stefanie Garber
0

The financial situation in the United States could prompt a rate hike in Australia, a major loan comparison site has warned.

Finder.com.au said interest rates in the Australian home loan market could rise as a consequence of the United States raising its debt ceiling.

“Our lenders source about a quarter of their funding from offshore, according to the Reserve Bank. So even a small amount of funding pressure will likely impact the cost of home loans, as lenders would pass on the costs to borrowers,” finder.com.au spokesperson Michelle Hutchinson said.

However, AMP chief economist Shane Oliver dismissed the idea the Reserve Bank might raise rates in reaction to the debt ceiling vote.

He said raising the debt ceiling would remove a risk to the global economy, which would be thrown into crisis if the USA defaulted on its loans.

“If the USA had not increased the debt ceiling and defaulted, the crisis could have caused the RBA to cut interest rates. But just because the RBA won’t cut rates, doesn’t mean they will raise them,” he said.

The Australian recovery continues to be subdued, so the Reserve Bank is unlikely to increase rates until next year, he said.

Finder.com.au claimed an interest rate increase of 0.25 percentage points could push up monthly repayments on the total value of home loans by about $233 million.

“It's important for borrowers to be prepared for rising interest rates because it's only a matter of time before rates rise. And the United States could be speeding this up much faster than we expected,” Ms Hutchinson said.

The debt ceiling represents the total value of government borrowing, usually issued in the form of treasury bonds and securities.

The US Congress voted on Wednesday to temporarily raise the ceiling until 7 February 2014.

promoted stories

Top Suburbs

Highest annual price growth - click a suburb below to view full profile data:
1.
FAIRLIGHT 46.02%
2.
CASUARINA 44.36%
3.
THE ENTRANCE NORTH 41.09%
4.
ULTIMO 40.67%
5.
LAVENDER BAY 40.2%