Mortgage holders cheer RBA rate cut | News

2nd December 2008

MORTGAGE holders and home buyers have welcomed the Reserve Bank of Australia's (RBA) latest rate cut, and more good news may be in store for the new year.

The RBA has cut official interest rates by 100 basis points to 4.25 per cent, the lowest level in six and a half years.

It was the fourth successive monthly cut by the RBA in a bid to head off the impact of slower world economic growth on an already soft Australian economy.

CommSec calculated the rate cut would save an average mortgage holder, with a $300,000 home loan, $193 a month on repayments.

Mortgage broker Mortgage Choice said the RBA's rate cut was an early Christmas present for homeowners.

Lower interest rates, coupled with the government's boost to the first home owners grant, will allow many to consider entering the property market, Mortgage Choice spokeswoman Kristy Sheppard said.

"The scene for all manner of Australian property buyers is looking brighter," she said.

The Housing Industry Association (HIA) is hopeful of a housing market recovery.

"Rate cuts are providing mortgage relief to existing home owners, but importantly helping more first home buyers purchase a home of their own," HIA policy chief executive Chris Lamont said.

"Rate cuts, combined with the first home owners grant, are making home ownership a reality for a cohort who had all but given up."

Many in the market believe there's more relief to come for home owners.

"While there's universal agreement that things are going to remain tough for some time, the RBA will have little choice but to keep cutting official interest rates," Loan Market Group chief executive Jennifer Nielsen said.

"The way the economy is performing, you could see the cash rate being lowered in Australia to as little as 2.5 per cent over the next 12 months."

Retailers also cheered the rate cut, hoping the savings made on mortgage repayments were funnelled into Christmas and new year shopping.

"Hopefully this will help turn consumer confidence around and start the upwards trend for retail spending after successive months of stagnant and declining growth," Australian Retailers Association executive director Richard Evans said.

"We now see strong growth to return by September 2009, but the rest of the economy lags three to six months behind in the retail-sector cycle."

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