Another month goes by and the Reserve Bank has lifted the official interest rate by 25 basis points - marking the fourth time in a row it has altered rates on Melbourne Cup day. The market had expected this decision as the economy continued upon its road to recovery.

I know it is hard to mentally accept, but this is actually good news for the economy in general. As I said last month rates simply could not remain at the extremely low levels they have been at. Overall if we look back, only around 12 to 18 months, rates were 8 to 9%. Still way above where they are today so in comparison we are still in a very good position. If rates were kept at recent lows for too long we would all pay in the end with rates having to be moved much higher to rein in an economy that would be over stimulated. By raising rates now the RBA hopes to keep rates in check over a much longer period and avoid rates going too high.

It seems the world is slowly coming out of the financial crisis it has been in over the last couple of years and Australia seems to have weathered the storm better than most. Hopefully you have been able to take advantage of the recently low rates to build up your buffer funds in your offset accounts. Remember that any extra savings you have in your offset account will save on interest payments on your home loan.

The question on everyone’s lips seems to be ‘How high will rates go?’. While I do not have a crystal ball, the general consensus from the majority of economists I hear is that we could see a rise of around 1 to 1.5% in total over the next year or so which would take standard variable rates into the low to mid 7% range. This is still a very good rate in reality. Really however, only time will tell and a lot will depend on how well the world economy is really recovering.