Official Interest Rate Drops to 1%

Posted on 2/07/2019  
Official Interest Rate Drops to 1%

The Reserve Bank has cut the cash rate twice in two months, a move not seen in more than a decade.

Now at 1.00%, the official interest rate was last lowered in consecutive months in 2008 when it was slashed at five consecutive meetings from 7.25% in August to 3.25% in February 2009.

Ahead of this week's rates decision, Federal Treasurer John Frydenberg said: “We do expect the banks to pass on in full to the Australian people the benefits of sustained reductions in their funding costs.”

Last month ANZ and Westpac were criticised for not passing on the full rate decrease to borrowers.

Nevertheless, real estate consumers are enjoying mortgage rates at unprecedented levels. Mortgage broker Louise Lucas of The Property Education Company says some lenders are now offering interest rates to owner-occupiers below 3%.

Falling interest rates are part of a trend of positive events which has lifted sentiment in the real estate sector. “Buyers are out in force,” Lucas says.

This week’s RBA move was predicted by most analysts. Of the 40 experts and economists polled in the latest Finder RBA Cash Rate survey, 68% correctly tipped the easing.

Graham Cooke, insights manager at Finder, says last month’s reduction – the first change to the cash rate in almost three years – was perhaps too small to have the desired impact.

“The objective is to lower unemployment, boost wage growth and push inflation back to target,” Cooke says. “It’s clear that one cut isn’t enough. Frankly, two cuts might not be either, but it’s a step in the right direction and it’s great news for homeowners. It’s two down and maybe one or two more to go.

“On an average mortgage, if your bank passes on both rate cuts in full – that’s a 50 basis point reduction – you could be saving almost $42,000 over 30 years.”

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