Interest rates cut in move to restore confidence

Posted on 2/09/2008  

The Reserve Bank of Australia today announced the first cut in interest rates in almost seven years.

The RBA cut interest rates by 0.25 percentage points, dropping the official cash rate to 7.0%. The rate cut is the first following a dozen interest rate rises, including consecutive increases in February and March - which the RBA now recognises was one interest rate rise too many.

For home owners with a mortgage of $350,000, a cut of 0.25 percentage points should reduce monthly principal and interest payments by about $60. If, as many analysts predict, the RBA cuts rates again before the end of the year, the combined impact of two consecutive rate cuts would be about $120 per month on a $350,000 loan or $140 a month on a $400,000 mortgage.

The Real Estate Buyers Agents Association of Australia (REBAA) has welcomed the move, saying it will help restore confidence in the property market. REBAA president Scott McGeever says buyers recently have been adopting a "wait and see attitude", declining to commit to a purchase until interest rate trends were clearer.

"We believe it will take another rate cut before the end of the year to properly restore confidence in the market," McGeever says.

ENDS

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