The Reserve Bank's decision to slash the official interest rate by a whopping 1% this week will significantly boost Australia's property markets as it puts hundreds of dollars back into pockets of struggling mortgage holders, according to experts.
The four major banks have committed to passing on an interest rate reduction of 0.8% following the 1% cut, which translates into a saving of $166 per month on average repayments for a $250,000 loan*.
The aggressive rate cut will lift consumer confidence and prompt more buyers and investors to return to the housing market, added RP Data national research director, Tim Lawless.
"It's likely that today's interest rate cut will motivate more buyers back to secure their pre-approvals and dip their toe into the housing market," he said.
"The mortgage belts in areas such as western Sydney will be some of the first markets to respond - demand has been building in these areas from first homebuyers, low-income families and investors."
Market conditions still remain in favour of the buyer, he added, but the window of opportunity to secure a well-priced property "may be closing earlier than most would have expected".
Craig James, chief equities economist at CommSec, said the Reserve Bank "rightly believed" that shock treatment was necessary to change the mood and momentum of the economy, and said that rates have further to fall - as early as November.
"Finally home borrowers have a reason to celebrate, and there may be even more good news down the track. A cash rate of 6% still constitutes restrictive monetary policy; it's only when the cash rate gets to 5% or below that the Reserve Bank is again pressing on the accelerator rather than the brakes," James said.
* Visit www.yourmortgage.com.au/calculators to work out exactly how much the interest rate cut will save you