The Reserve Bank of Australia calmed fears that the rate cut will further stimulate housing prices, saying that there are little risks to the lowering of the cash rate from two per cent to 1.75 per cent.
“In reaching today’s decision, the board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate,” Reserve Bank Governor Glenn Stevens said in a statement. “At present, the potential risks of lower interest rates in this area are less than they were a year ago.”
RBA further said that outside stimulus, such as tightening of lending standards and foreign lending cuts are already doing enough to cool the market.
Property analysts welcomed the rate cut, saying that this move could boost the economy and attract more first-home buyers into the market, especially in softer performing capitals like Perth and Darwin.
“It will improve overall confidence and allow people to get ahead on mortgage repayments
and increase mortgage affordability for everyone,” said Grant Harrod, chief executive of LJ Hooker. “However, we don’t expect to see another huge jump in property prices.”
According to online comparison website Ratecity.com.au, the rate cut will help save home buyers about $50 a day on an average $300,000 30-year home loan. Another comparison site, finder.com.au, also agreed that home buyers stand to benefit from this move, but only if they do their homework.
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