Reserve Bank rate rise an unbackable favourite

By Stuart Fagg, ninemsn Money

The winner of today's Melbourne Cup has yet to be decided, but a 25 basis point interest rate rise from the Reserve Bank is an unbackable favourite.

Online betting agency Centrebet stopped taking bets on a 25 basis point rise in rates late last week, and economists are backing a rise when the RBA announces its decision at 2:30 AEDT today.

The board is generally expected to lift the cash rate to 3.5 per cent from 3.25 percent on the back of improved forecasts on unemployment and general economic growth.

It would add around $45 to the average monthly mortgage repayment and would be the second rise in as many months as the bank continues to warn of a move away from emergency levels.

Despite the misery the hike will bring to homeowners, some punters stand to clean up. While the 25 basis point hike was offering narrow odds before the book closed, Centrebet has been offering Reserve Bank/Melbourne Cup double bets.

At lease one punter stands to win $25,000 if the RBA hikes rates and a Bart Cummings-trained horse takes the Cup.

"Most of the split cup/RBA money is on 25 basis points and a Bart Cummings horse to win," said Neil Evans of Centrebet. "That started at $5.50 before coming in at $4.75. It closed at the weekend. We’ve got one punter with $5000 on a 25 basis point rate rise and Cummings horse to win."

All eyes will be on the retail banks after the Reserve Bank's announcement. Both NAB and ANZ have refused to rule out raising their home loan rates by more than the central bank.

The government's delivery of a better-than-expected economic forecast on Monday is widely tipped to be another portent of gloom for homeowners.

Last month, the bank raised the official cash rate for the first time in 19 months.

with AAP