The Reserve Bank delivered an early Christmas present to Ballarat home buyers yesterday, slashing interest rates by a quarter of a percentage point.
The Australian Retailers Association (ARA) demanded the banks act on the decision immediately and cut rates for consumers under mortgage stress.
For first-home buyer Darcy Demasson, the rate cut came as welcome news.
Mr Demasson, 20, purchased a house at Sebastopol last month and now looks forward to getting ahead on his repayments.
“It’s great for me,” he said.
“It was the reason I went for a variable rate on my mortgage – jump on that bandwagon while it’s good.”
The cash rate, which now sits at 3.00 per cent, is at its lowest since early October 2009, during the global financial crisis.
The previous interest rate move was a quarter of a percentage point reduction in October.
Mr Demasson said he decided to buy his first house after coming off a recent deployment in East Timor and did a lot of research to find the best rate.
“The mortgage length is over 30 years so definitely in the long term it’s going to make a big difference,” he said.
ARA executive director Russell Zimmerman said the decision would provide a much-needed boost for consumers to go shopping, put some presents under the tree and plan for a great Christmas feast, and there was no excuse for the banks not to immediately pass on the rate cut in full.
“With the RBA being more accommodative in its approach to monetary policy and household budgets clearly stretched beyond reasonable limits, there is absolutely no excuse for the banks not to pass on the full benefit of the three percent interest rate to their customers, including business customers who rely on finance to operate,” he said.
“It’s time for banks to show some reason and open their eyes to current economic times, which have caused interest rates to be brought to levels that are manageable for Australian households and businesses.”
The Housing Industry Association (HIA) said signs of a recovery in residential construction were tentative at best and quite narrowly based, so news of a further rate cut was welcome.
“Two interest rate cuts this quarter (October and now December) improve the prospects of a tangible recovery emerging in 2013 for both new-home building and renovations activity,” HIA chief economist Harley Dale said.
“Lower interest rates make a vital contribution to improving conditions for the residential construction industry, but government action is the key.”