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RBA Cuts Rates - October 2012

By Reporter 02 October 2012 | 1 minute read

The Reserve Bank of Australia has cut the official cash rate for the first time in four months.

At its monthly Board meeting, the Reserve Bank decided it was prudent to cut the cash rate from 3.5 per cent to 3.25 per cent in a bid to stimulate buyer confidence.

Speaking to Smart Property Investment, RP Data's chief executive officer and managing director, Graham Mirabito, said the decision should encourage more buyers to enter the market over the coming weeks.

“Market activity in the mortgage space increased by five per cent in September, with buyer activity also set to climb over the spring season,” Mr Mirabito said.

“The RBA’s broad based stimulus strategy is positive move for all home buyers, in particular, first time buyers.


“With rental costs soaring and vacancy rates low across the country, this rate cut could be the final push many would-be buyers needed to enter the market.”

The Real Estate Institute of Australia (REIA) has also praised the RBA, claiming their shock decision to lower the offical cash rate by 0.25 per cent as a great relief for home owners and potential buyers.

“Home-owners always like to see interest rates go down. This cut means the average loan repayment is reduced from $2,155 to $2,105, or by $50 per month," REIA president Pamela Bennett said.

“The average loan repayment is now $486 per week which is $153 per month less than this time last year. Housing affordability will improve by 2.5 per cent with the proportion of the median family income to meet average loan repayments decreasing from 31.9 per cent to 31.1 per cent.”

Positive Real Estate's CEO, Sam Saggers, also told Smart Property Investment that moving into property buying will be the next step.

"The next boom will be the affordability boom," Mr Saggers said.

"Many people will now jump out of the rental pool and become owners as it is officially cheaper to own than rent in many of the best markets."

Should this cut be passed on by lenders, he indicated that it may be just one of more to come.

"I believe it will be the first of two major cuts and by April next year, the cash rate will be at 3 per cent, meaning the standard variable rate may just be around 5.8 per cent.

"The market will respond and grow well in value, particularly in affordable markets where supply is tight," he said.

- Update. This potential impact has recently been reported by Smart Property Investment as buyer interest about the interest rate declines rendering the outcome uncertain.



Rates refer to a fixed price or an amount charged by sellers or providers for their goods and services.

RBA Cuts Rates - October 2012
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