RBA Cuts Interest Rate To 2.25% - Effect on Property Market

WITH interest rates moving for the first time in 18 months, many households across Australia are celebrating.

Those with mortgages are cheering at the thought of extra money in their pockets every month. Someone with a $500,000 mortgage can expect to save $73 a month from the 25 basis points cut announced by the Reserve Bank this week.

Commonwealth Bank, Westpac and a number of other lenders including ING Direct, ME Bank and Bank of Queensland have passed on the cut in full (and more, in Westpac’s case).

The rate cut is also expected to give the Australian economy a boost, with businesses encouraged to hire more staff and with consumers encouraged to spend more money.

But before you go popping those champagne corks — because, after all, you can afford proper champagne now — there are downsides to the rate cut. The Reserve Bank does not giveth for no reason.