BORROWERS have been given reason to celebrate this month, with the Reserve Bank of Australia cutting the official cash rate to the new historical low of just 2 per cent.
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At its board meeting at the beginning of the month, the Reserve Bank announced it would cut 25 basis points off the cash rate, marking the second rate cut of the year.
I'd say the sluggish pace of Australia's economic rebalancing ultimately encouraged the Reserve Bank to take action and trim the cash rate.
Recent economic data suggests the first rate cut failed to have the desired impact, with consumer sentiment falling sharply in April.
The Westpac Melbourne Institute of Consumer Sentiment Index declined by 3.2 per cent, over the month of April, to just 96.2, meaning that pessimists outweigh the number of optimists.
With the Federal Budget set to be released later this month, the Reserve Bank may have trimmed the cash rate to give consumer sentiment a boost ahead of the budget announcement.
Last year, consumer sentiment plummeted 6.8 per cent in the aftermath of the budget and remained weak for the rest of the calendar year.
Furthermore, the rising Australian dollar would no doubt have given the Reserve Bank room for concern at the board meeting.
Regardless of the reasons behind the rate cut, the decision to trim the official cash rate should spell good news for local home owners.
If February's rate cut is anything to go by, borrowers can expect their lender to pass the Reserve Bank's latest rate cut on, taking home loan rates to new lows.
Of course, this opens up a great opportunity for home owners and potential home buyers alike.
If you have been in the same mortgage for the last few years, you may find there is another product that is not only cheaper but more suitable to your needs.
Alternatively, if you are looking to get onto the property ladder in thenot-too-distant future, now may be a great time to do just that.
■ Richard Windeyer is a mortgage broker with Mortgage Choice. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Phone Richard Windeyer on 1800 01 LOAN.