The Reserve Bank has cut interest rates by 0.5 per cent today.
The 50
basis point fall comes on the back of evidence the economy is struggling with
weaker-than-expected inflation figures released late last month. The official interest rate is now 3.75 per cent.
It is good news for
mortgage holders who were earlier this year hit with out-of-cycle rises by many
lenders.
Each 0.50 per cent drop in interest rates slices about $120 off the monthly
interest cost of an average Australian mortgage.
All eyes will be on the financial institutions to see if they follow suit. It is possible lenders could pass on a smaller proportion of the
official drop to their own customers.
At least one bank will hold off announcing a decision for more than a week
with the ANZ Bank set to release its move next Friday, the second Friday of the
month.
If lenders do make cuts, it is a smart idea for borrowers to
maintain their current repayment levels.
Many institutions don't automatically adjust repayments down in line with
lower rates, and if you think yours might, you should speak with them and ask
for your repayment amounts to be kept as they are.
"It is inevitable that rates will rise again in the future, so this is a
golden opportunity to pay some extra money off your loan if you can afford to do
so."
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