Interest Rate Cut, now lets see what the banks pass on!

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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.

"This is quite a heavy cut and the Reserve will be hoping that it has maximum impact," says Domain property expert Carolyn Boyd.

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, says Boyd. 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, Boyd says 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," says Boyd.

"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."

Source: domain.com.au

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