Interest rates 'to rise but not to full increase'

Interest rates are set to increase but home loan customers could still make savings, according to an industry expert.

Home loan customers could make monthly savings as interest rates are set to increase but not to their full extent, according to an industry expert.

Analysts expect the Reserve Bank to add one per cent to the official interest rate during 2010, but one expert told the Daily Telegraph many banks will absorb some of this rather than pass the full hike on to customers.

Australian macroeconomist Chris Richardson, who deals with the performance of the economy, said homeowners could be set to save money if lenders passed on 70 basis points in 2010.

He added that competition for new customers could encourage banks to absorb some of the cost in order to seem more attractive to people shopping for a home loan.

Mr Richardson, the director of Canberra-based Access Economics, said the trend is likely to continue next year: "We are probably looking at 30 basis points in 2010 and another 30 or 40 points in 2011."

The news will alert home loan customers with savings accounts, who can boost their monthly input into savings accounts thanks to the extra cash.

However, for homeowners looking for tips for saving, Paul Clitheroe, director of financial planning firm ipac, recently told the Sunshine Coast Daily that "a top priority" would be making repayments on credit cards and similar Australian banking products.