WHAT ABOUT MORTGAGE RATES?

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Homebuyers can expect their mortgages to become more expensive this year, with the Reserve Bank tipped to raise the cash rate for the first time since November 2010.

Mortgage Choice chief executive John Flavell said the possibility for a rate hike became far more likely after the US Central Bank announced it would increase its benchmark short-term interest rate in December.

“The [US] Central Bank said the recent progress of the economy gave them the impetus they needed to increase the Federal Funds rate by 25 basis points to 0.75%,” he said.

“The Bank also indicated that the Federal Funds rate could rise by a further 75 basis points throughout 2017 — through three separate rate increases.

“This announcement, combined with the fact that many of Australia’s lenders have started to raise rates across their suite of home loan products, would suggest a cash rate increase by the Reserve Bank of Australia is now more of a possibility than not in 2017.

“The Reserve Bank of Australia had previously stated that the easing bias has passed and the latest changes by the US Central Bank would support this.”

However, he said any rate rises are “likely to be small”, so the cost of borrowing will still remain “incredibly affordable”.

“As a result, I would expect certain parts of the property market to remain strong,” Mr Flavell said.