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The Reserve Bank of Australia (RBA) has made a historic announcement at their monthly board meeting today.
The Reserve Bank decided to cut interest rates by a further 25 basis points, officially taking the cash rate to its lowest point ever – with the rate now sitting at just 2.5 per cent.
RBA governor Glenn Stevens said the rate cut was a wise move for the board, as data released earlier this month found headline inflation was considerably weaker than expected.
Loan Market’s director Mark De Martino said the 25 basis point cut was a good move and, provided the lenders follow suit, it could save homeowners approximately $60 a month on a $300,000 mortgage.
“And for those looking to purchase a new home, these lower rates are going to encourage buying. However, I would caution those looking at a home loan to understand that interest rates aren’t always going to be this low,” Mr De Martino said.
Mr De Martino said that a savvy strategy for those looking to pay off their home loan faster and with less interest charges would be to maintain their repayments at the same amount paid before the rate cut.
“If you're conditioned and comfortable to continue making repayments at the level they’re at, prior to the rate drop, you can pay off your home faster and put more equity in your home by keeping the same repayments,” he said.
Senior economist for Australian Property Monitors Dr Andrew Wilson told Smart Property Investment yesterday that if the RBA did move, the property market is likely to strengthen.
"The real prospect of a cut in interest rates by the Reserve Bank this week will only add fuel to rising buyer activity and confidence, despite sobering economic forecasts,” he said.
Rates refer to a fixed price or an amount charged by sellers or providers for their goods and services.