South Australia's auction clearance rates have remained strong, despite the threat of a rise in interest rates.
Agents reported strong bidding across Adelaide yesterday.
Figures compiled by the Real Estate Institute of SA show just 10 of 45 properties auctioned across SA yesterday were passed in - a clearance rate of 77 per cent.
The figure was slightly down on the 81 per cent that cleared last week, but up on the 75 per cent two weeks ago.
REI state president Michael Brock said the confidence in the market was also reflected in high sale prices, with many properties sold well above the reserve price.
THE Reserve Bank is expected to lift interest rates on Tuesday, adding $50 to the average monthly home loan repayment amid warnings the number of defaulters is set to surge.
For the first time, the bank will announce its latest decision on rates on Melbourne Cup day at 2.30pm -- half an hour before the race on which Australians bet more than $100 million each year.
Most financial experts are tipping a rise in the official cash rate of 0.25 per cent, but some economists said the rise could be 0.5 per cent -- meaning a $100 increase in repayments on a $300,000 loan.
The news will be a blow for many families struggling with repayments and thousands are predicted to fall deep into arrears.
New research conducted by analysts Fujitsu Consulting has concluded the number of people who default on their mortgage payments will almost double from 25,000 today to 40,000 by the end of next year.
First-home buyers, lured by government stimulus but caught by rising rates, pay freezes and reduced working hours, are predicted to account for nearly half the default increase.
"Many people are already having a tough time and paying their mortgage with their credit cards and rate increases of this magnitude will push thousands over the edge" says Martin North, managing director of Fujitsu Consulting.
"First-home buyers will be particularly hard hit because so many were caught up in the hype of the stimulus and talk of a rapidly rising market and didn't give enough thought to how they would cope with rising rates."
Stronger than expected inflation figures released last week, plus news on Friday that the US has emerged from recession, have made a rate rise this week a certainty. "A half-point hike can't be ruled out even if the odds are slim," said Shane Oliver, chief economist at AMP Capital.
Bill Evans, head of global economics at Westpac, says he believed rates could rise by 0.50 per cent on Tuesday.
"I think the RBA has a degree of urgency about it at the moment," he said.
"Rates are very low and it wants to get up to a more normal level as quickly as possible. It's better to announce a big hike now than wait until rates are higher and then jack rates up."
Financial markets are pricing in a steady increase in the cash rate, currently 3.25 per cent, to around 4.50 per cent by June, and onwards to between 5 and 5.5 per cent by December next year.
If correct, this would push the typical standard variable rate at the big banks, currently around six per cent, to around 8.20 per cent and raise repayments on a $300,000 mortgage from $1798 to $2242 -- an increase of $433 a month.
Similar increases have been factored into Fujitsu Consulting's modelling.
The company used data from its regular surveys of 26,000 homeowners and combined the results with various forecasts about how much rates will need to rise before borrowers can no longer afford repayments.
The modelling is based on three key assumptions: the cash rate rising to 5.25 per cent by December, 2010; unemployment rising by one per cent to seven per cent and inflation hitting 3.5 per cent over the same period.
