The 25 basis point fall is the first movement in rates since Melbourne Cup Day 2010 and has been widely tipped since lower-than-expected inflation figures were released last week.
The 25 basis point reduction is good news for people paying off a mortgage.
“This fall in rates will be greatly appreciated by households as it will put an extra $60 into their pockets each month,” says Domain property expert Carolyn Boyd.
The official interest rate is now 4.5 per cent. Until today, mortgage holders on variable interest rates were being charged a standard variable rate of about 7.83 per cent by their lenders.
Each 0.25 per cent drop in interest rates slices about $60 off the monthly interest cost of an average Australian mortgage.
Boyd says it’s a good idea for mortgage holders to keep paying their loans at the same rate they have been for the last year, and not take advantage of the opportunity to decrease their repayments.
“You’ll still get any rate cut your lender passes on, of course, but if you keep your repayments at the same level, you will pay your loan off sooner and build a buffer for any unexpected rough spots.”
Today’s rate cut will provide a welcome boost to the property market, which has slowed in the last year and remains subdued in most parts of Australia. It could also improve the confidence of potential first home buyers.