ANZ economists predict the official cash rate will move from the current rate of 3 per cent to 3.75 per cent by September 2010. Westpac believe the cash rate to move in the March quarter and reach 4 per cent by the end of next year, with Commonwealth predicting rates will remain on hold until the first quarter of next year, but then rise quickly to 4.75 per cent by the end of the year. 

If this is going to be the case it is essential for home owners to start building a buffer by making extra payments to their loans or putting some extra money away into a savings account to assist with making these (potentially) increased repayments in the near future.

Another option is looking into a fixed home loan rate. These can provide certainty of loan repayments as you can have the rate set over a period of 1 to 10 years. A downside is an increased rate borrowers might need to pay in the short term.

The Australian Bureau of Statistics housing finance figures have shown an increased demand for fixed home loan rates over the past few months. It would seem all of the talk of rate rises has had an impact on borrowers with fixed home loan rates making up 8 percent of all new loans in June, which was up from 6.2 per cent in May and a low of 2.5 per cent in March.

With some banks already increasing variable rates it might be time to look into a fixed home loan rate.

Variable or fixed home loan rates aside, it is always essential to build up a cash reserve either in your offset, redraw or savings account to help with increases to repayments in the future.

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