Homeowners are set to enjoy the second rate cut this year, after the Reserve Bank of Australia cut 25 basis points from the cash rate yesterday. This drop takes the official cash rate to the historical low level of 2%.
The Reserve Bank indicated that the cut was in response to a slow economy. It is likely that the decision was made to halt the resurgence of the Australian dollar, which recently rose to US80c, making our exports less competitive.
By dropping rates, the Reserve Bank is hoping to stimulate the economy ahead of the federal budget to be handed down this month. This is of particular concern for the Reserve Bank, because consumer confidence plummeted after last year’s budget delivery and stayed low for the remainder of the year.
For homeowners, however, the rate announcement is good news. It is likely that the cut will see the Brisbane housing market pick up, as investors and first home buyers take the opportunity to get into the market.
Most lenders passed cuts along following February’s cash rate drop and they are expected to do the same this month, which will take home loan rates to new lows. It is expected that the cut will take approximately $44 per month off the cost of a $300,000, 30-year principal and interest mortgage*.
This is great news for anyone looking to purchase property and a timely opportunity to refinance. If you’ve had your mortgage for a few years, you may find that there are now cheaper products on the market that you can take advantage of.
* Calculation made using a standard variable rate of 4.15% (This takes into account a 25 basis point rate cut from 4.5%).