Eureka Home Loans director Barry Nunn said while many home owners had absorbed three successive rate rises of 0.25 per cent last year, yesterday's fourth rise to a 4 per cent cash rate would place pressure on the thousands who took advantage of historic interest

rate lows and large government cash incentives to purchase their first homes.

"I think it's going to put the squeeze on a lot of people,'' he said.

"There's a lot of young couples who borrowed who don't have kids so they won't feel it as much; it will just teach them to tighten their belt a bit.

"But for the family unit, it will put the pressure back on for the first time in three years.

"We are seeing more people in arrears now than we have seen for a long time.

"With our client base we have had hardly any arrears for the past 10 years, now we have had about 30 or 40 customers since November.''

Australian home owners can expect to pay an extra $31.61 per month on a $200,000 mortgage after yesterday's rate hike, or $39.51 on a $250,000 loan.

Reserve Bank of Australia governor Glenn Stevens said despite recent interest rate rises, lending rates were still below average.

"The board judges that with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average,'' he said.

"Today's decision is a further step in that process.''

Economists have tipped as many as three further rate rises before the end of the year.

Mr Nunn said despite a drop in demand for new homes in Ballarat in the past quarter, building activity in the region remained strong as the construction industry continued to work on the backlog created by last year's boosted first-home-buyer grants.

"It's not a doom and gloom situation because I really do believe until the end of the year everything will be propped up because the last six-to-nine months have been so busy,'' he said.

"If interest rates don't go any higher, I think people will manage.

"But if they do, businesses will slacken off a bit and a lot may cut back their employees to part-time and start cutting overtime hours.

"A lot of our clients seem to rely on overtime."