Interest rate rise hurt

BARRY Richards was not impressed when he heard he and his new wife would soon be forking out more to pay for the roof over their heads.

Barry, an air-conditioning mechanic, and Sarah, a casual school teacher, bought their first home late last year at Toormina.

"We haven't got a lot of spare cash, and it looks like we'll have even less soon," Mr Richards said after being told his mortgage repayments would soon increase.

Yesterday the Reserve Bank, as expected, lifted official interest rates by a quarter of a percentage point to 5.75 per cent. The standard variable home loan rate is now likely to rise to about 7.5 per cent.

"We're already paying heaps to one day own our home. This will definitely make us tighten our belts," Mr Richards said.

He added that the rate rise coming at a time of record fuel prices would hurt.

"Sarah spends a lot on fuel getting to her different casual teaching jobs, so to pay more to both run her car and buy our house means we'll have to make some changes. I hate to say it but I might have to cut back on my beers," Mr Richards laughed.

He said their mortgage was only a little bit below the State's average mortgage of $249,800.

"It looks like we'll probably be paying an extra $35 a month.

"We'll manage that but will be in trouble if rates keep rising."

The Mortgage Industry Association said the increase in interest rates will be painful but will not push many homeowners over the edge.

Association chief executive Phil Naylor said the rise had been anticipated.

"We're getting advice from our members that it's already been factored in, people have been paying more off their home to build up a little buffer," Mr Naylor said.

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