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Property News

Second reduction in cash rate by RBA

December 07, 2011

A second cut in the cash rate by the Reserve Bank of Australia (RBA) has been delivered by the regular council meeting on December 6.

RBA governor Glenn Stevens announced that the new rate of 4.25 per cent will come into effect on December 7 and was made in response to the broader outlook for inflationary factors.

Speaking on the monetary policy decision in a statement, Stevens asserted: "The reduction in the cash rate as a result of the Board's previous decision flowed through to lending rates, which are now around their average level of the past 15 years.

"Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2 to 3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme."

Stevens also noted that CPI inflation had remained above the target set by the RBA, but was likely to recover following the improved production levels expected later this financial year.

For residential property owners, the question is whether or not the banks will pass on the savings rate to them in full.

Some experts have predicted that the reduction of 25 base points could mean that mortgage holders cut an average of $47 off their monthly repayments - allowing them to pay their hikes off sooner.

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