Reserve Bank of Australia cut interest rate by 25 basis point to a record-breaking low of 1.75% on 3rd May 2016. The new cash rate brings enormous opportunities to investors and home buyers in the housing market.
Australian economy has recently suffered from lower-than expected inflation, weak quarterly CPI outcome and slow employment growth. To counteract these issues, RBA decided to ease monetary policy at this stage and cut interest rate.
According to the prediction from BT Investment Management, there is a high chance that RBA would cut its cash rate to 1 per cent and might even go for negative rates if inflation and economic growth continue to be a disappointment.
Australian big four banks passed on RBA rate cut. NAB, CBA and Westpac passed full RBA rate cut onto home loan customers while ANZ passed on 19 basis point.
The rate cut has profound impact on investors and home buyers. First, it alleviates repayment burdens, which reflected in less amount of monthly mortgage repayment. Second, it increases the total amount of mortgage available to individual home loan customers. Third, it creates more financial income to home buyers.