BUDGET CHANGES FOR FIRST HOME BUYERS

NSW is set to have the most generous first home buyer scheme in the country - provided you buy a new house or apartment.

The state government announced changes in the budget to more than double the first home grant to $15,000 for buyers of new property priced up to $650,000.

However, buyers of existing property are in for a nasty surprise. The $7000 first home owner grant - in operation since 2000 - will cease to exist.

This move is designed to motivate buyers to buy new rather than existing properties.

First home buyers of new houses and apartments will also continue to be exempt from stamp duty and it will now apply to properties worth $650,000, rather than the $600,000 previously.

The budget changes mean that, from October 1, first home buyers who purchase a new home priced at $550,000 can save up to $35,240, which is close to $20,000 more than the previous saving.

As expected, the government has now ended the stamp duty concessions for non-first home buyers of new properties.

But by way of compensation, it will offer a $5000 grant to purchasers other than first-timers - investors, upgraders and downsizers - for new properties priced up to $650,000.

RESERVE BANK INTEREST RATE ANNOUNCEMENT

The Reserve Bank has cut interest rates today by 0.25 per cent.

The official interest rate is now 3.5 per cent.

The 25 basis point fall comes after a big 0.5 per cent cut last month that, as yet, has failed to make an impact.

The softness in the non-mining sectors of the economy has forced the Reserve Bank to move again today.  Many people are hurting and have been hoping the Reserve Bank would make the decision it has.

Each 0.25 per cent drop in interest rates slices about $60 off the monthly interest cost of an average Australian mortgage.

The cut may not be the last for the year. It has been predicted the Reserve Bank will cut rates by as much as 1 per cent this year, taking the official rate as low as 2.75 per cent.

The big question now is, just how much of today's rate cut will lenders pass on?

Last month the average cut delivered was 0.38 per cent, despite the Reserve Bank slashing rates by 0.5 per cent.