Sneaky interest rate rises

Business owners and investors should watch out. They could soon be paying more on niche investment products and mortgages. Reports are emerging that banks and credit unions are clawing back margins by increasing rates on niche investment products and some mortgages.

Although the cash rate rise was only 0.25 percentage points, margin lending rates at banks has moved up between 0.34 and 0.45 percentage points.

The rate rise in niche parts of the business could well be in response to warnings by Treasurer Peter Costello that banks should make sure home loan rate rises do not exceed the official rate.

One lender was reported in the Australian Financial Review this morning saying that people who borrow money to invest in shares and managed finds could better withstand rate rises because they have enjoyed years of booming equity markets and margin loan repayments are tax deductible.

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