Smart money is on another interest rate rise

HOME-owners brace for more mortgage pain as experts predict 0.25 per cent increase from RBA.

HOME-owners are bracing for more mortgage pain today with experts predicting interest rates to rise by 0.25 per cent - the sixth increase in six months.

Economists say the Reserve Bank will today raise the cash rate on the back of rising inflation and the surge in property prices around the country.

Homeowners are paying an extra $297 a month on a $300,000 mortgage since rates were 3 per cent in September, according to loan comparison site RateCity.

It adds up. That extra cash could pay for a $259 Virgin Blue return flight from Sydney to Christchurch, an iPod touch for $244 or four months worth of morning coffees from the local café.

A 0.25 per cent rise would lift rates to 4.5 per cent, adding about $48 a month to the average loan of $300,000.

Economists said rocketing house prices and concerns about rising inflation would probably cause the RBA to pull the trigger today.

But CommSec economist Savanth Sebastian said it would be a good time to hold off, given that the Federal Budget was to be handed down next week.

"They would then have a better idea of what sort of fiscal measures will be in place," he said.

Online bookmaker Sportsbet.com.au reported a surge in betting that the RBA would increase rates.

"Two weeks ago, you could get $2.90 about a 25 basis points rise, now that's into $1.35," Sportsbet's Haydn Lane said.

The Australian Bureau of Statistics house price index showed the average house price across the nation's eight capital cities rose by 4.8 per cent in the March quarter.

This boosted the annual rate to 20 per cent on average, with Melbourne leading the way on 27.7 per cent. Sydney went up 21 per cent.