Interest rates raised

Mortgage holders will have to dig deeper after the Reserve Bank decided on Tuesday to lift interest rates by 0.25 per cent. It was a surprise move. Inflation figures out last week were lower than expected and most economists were predicting rates would remain on hold.

The 25 basis point rise takes the official rate to 4.75 per cent and will add about $50 to the monthly cost of an average mortgage.

It is the seventh increase since September last year and means mortgage holders of average $300,000 loans are now paying about $350 a month extra for their mortgages than they were in the middle of last year.

Until today's decision, mortgage holders on variable interest rates were paying about 7.3 per cent to their lenders.

After hotting up earlier in the year, calm has descended on the property market and price increases have slowed to a trickle as borrowers worry about the prospect of future rate rises. An influx of properties in spring has also given buyers more choice.