Markets react to RBA rate hint

By Your Mortgage

By Robert Carry

Australia's financial markets have responded to yesterday's comments by Reserve Bank of Australia (RBA) chief Glenn Stevens, in which he said there was a need to return interest rates to more "normal" levels, by predicting six further .25% hikes before June 2010.

 Speaking at a breakfast meeting in Perth yesterday, Stevens suggested that further hikes might follow last week's increase which lifted the cash rate to 3.25% from 3%. According to The Age Newspaper, Stevens' comments have prompted financial markets to tip seven interest rate rises in a row.

If the predictions are proved correct, the cost of servicing a $275,000 mortgage would increase by $335 per month when set against the 3% interest rate seen before last week's rate rise.