What should you do when RBA rate is rising? The course of action you might take will depend upon your individual situation.
If you have a variable rate loan, it seems clear that you should currently be directing every spare cent towards paying it down in order to minimise your balance when higher rates arrive.
If you’re in the savings camp and are comparing rates on various accounts and fixed deposits, you should bear in mind that shorter term rates are very likely to rise by a further 0.25% or 0.5%. And perhaps even more over the course of 2010.
For example, if I were choosing between a 3-month and 6-month term deposit, both offering the same 5 per cent annual interest rate, I’d currently opt for the 3-month alternative in the expectation that I’ll be able to roll it over in a few months’ time at a more advantageous rate.