Today the Reserve bank of Australia made the bold move of cutting the official cash rate.
This latest rate cut – the first in 18 months – means the official cash rate is now sitting at the historically low level of 2.25 per cent.
According to the Reserve Bank of Australia's governor Glenn Stevens, there were a couple of reasons for the cash rate cut.
In the first instance, consumer confidence continues to sit well below long term averages.
According to the latest Westpac Melbourne Institute of Consumer Sentiment Index, confidence grew by just 2.4 per cent in January to 93.2, meaning pessimists still outnumber optimists by a significant majority.
At present, the Index is still more than 9 per cent lower than what it was a year ago. In fact, it is currently sitting at the same levels recorded in the immediate aftermath of the Federal Budget – which is not a good sign.
And it is not just consumer sentiment that is low, business conditions and confidence both remain relatively low, according to the latest Monthly Business Survey from National Australia Bank.
These two things alone would have encouraged the Reserve Bank to cut the cash rate at its Board meeting earlier today.
Of course, with the Reserve Bank deciding to cut the cash rate, the question on everyone's lips is: will the banks follow suit and trim the interest on their suite of home loan products?
Given how competitive the mortgage market is at present and how hard Australia's lenders are working to win business, the answer is likely to be yes. That said, whether or not all of the lenders decide to pass on the full rate cut or just part of it will remain to be seen.
Regardless of how much Australia's lenders do cut their mortgage rates by, one thing is certain: the cost of borrowing will soon be more affordable than ever before.
With that in mind, now could be a great time for home buyers, investors and even property owners to consider their options.
If you have a mortgage that you haven't reviewed in a while, it is a good idea to give it a home loan health check. You may find there is now another deal with a sharper rate on the market that is better suited to your needs.
Of course, before switching it is important to take the time to compare all aspects of the loan from the rate to the fees and features to make sure you are getting a loan that is truly suited to your needs.
Alternatively, if you are looking to purchase an investment property or just get your foot onto the property ladder, now could be a great time to do so.
Your local Mortgage Choice mortgage broker will be able to step you through your options and help you understand whether or not now is the best time for you to buy or refinance.