RBA lowers rates – great news for buyers!

0.25% Melbourne Cup Cut

In an excellent move for home buyers, the Reserve Bank has cut interest rates for the first time in more than 2½ years, bringing relief to households and corporate borrowers. As widely tipped by economists, the central bank today lowered its key cash rate by 25 basis points to 4.5 per cent. The move reversed the increase imposed on Melbourne Cup Day last year, the most recent time the RBA has shifted rates.

Combined with changes to first home buyer stamp duty concessions, this will help to create strong sales activity as we approach Christmas.

Many home sellers are choosing to take advantage of this increased activity by bringing selling plans forward, in a hope to have a contract signed before December 31st.

More to come?

Westpac’s chief economist Bill Evans was among the first economists to predict the RBA would shift from raising rates to cutting them. He continues to predict the central bank will lop 100 basis points over the cycle, trimming them to 3.75 per cent.

”We continue to expect that the next cut will come in February after the Bank gets further evidence on inflation and has time to assess the impact of this move,”  Mr Evans said.

He noted that the RBA today described 4.5 per cent rate as “more neutral” rather than “neutral”.

“Consistent with previous statements the Governor correctly continues to describe overall financial conditions as tighter than normal, recognising weak credit growth and falling house prices,” he said. “There is also a much less upbeat description of the external sector.”

Source: www.smh.com.au