Interest rate rises leading to increased debt

People could be thrust into further debt if interest rates rise again, one expert has said.

It could soon be the case that everyone is in more and more debt when the interest rate rises.

This is the opinion of Nicole Pedersen-McKinnon, writing for the Age, who believes that the only direction rates are going is up, which could be bad news for someone with a credit card.

Inflationary pressures created by the Reserve Bank of Australia (RBA) mean people will soon have to pay more.

And the industry expert advised individuals to ensure they are well equipped to manage when rates do increase.

Those whose loan stands at less than 80 per cent of their property's value are in a good position, according to Mrs Pedersen-McKinnon.

She added: "This provides a buffer if prices fall but, more relevantly, gives greater scope to cut your repayments by refinancing."

Earlier this month, the Reserve Bank of Australia raised the official cash rate, resulting in some banks - such as ANZ - increasing rates on credit cards by 0.25 per cent.


By Nate Sawyer