First Home Buyers set to benefit from rate cut

Market Insights
8 years ago
2 minutes

The Reserve Bank of Australia has slashed interest rates by 25 points to a new record low 1.75% at its May meeting, following low inflation data.

“Now is a good time to borrow money to purchase a property as the cost of the capital is the best it has ever been,” explains Real Estate Institute of New South Wales President John Cunningham.

Three of the big four banks immediately acted to lower mortgage rates, with the ANZ bank failing to pass on the full cut.

Instead, the ANZ will reduce its standard variable home loan by 19 basis points.

“It is 12 months since the RBA cut interest rates to the previous low of 2.00% and since then the banks have independently moved rates higher. The banks now have a duty to pass the full benefit on to consumers,” Mr Cunningham says.

The Real Estate Institute of Victoria has joined the calls for all banks to pass on the rate reduction to customers.

President Geoff White is hailing the cut as a win for first home buyers, as it boosts confidence in the market.

“Buyers currently have access to the lowest interest rates in the nation’s history, providing much needed assistance to first home buyers,” he says.

“We encourage all of the banks to follow suit and deliver an optimal setting for Melbourne home buyers.”

Governor Glenn Stevens says the board took “careful note of developments in the housing market” when reaching the decision to slash the rate to a record low.

He says the board believes moderate property price growth and improved lending practices in the housing sector paved a path for lower interest rates.

“At present, the potential risks of lower interest rates in this area are less than they were a year ago,” he says.

“Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.”

The RBA will next meet on June 7.