Cash rate down to a record low

Borrowers look like being the winners this week, as lenders trip over themselves to offer even more competitive rates after the Reserve Bank cut the official cash rate to 2.75 per cent, the lowest it has been in 53 years.

This was immediately evident with moves by the NAB, ING and Bank of Queensland soon after the announcement to pass on the full .25 per cent cut to their customers. Before close of business on Tuesday, the Commonwealth and Westpac banks had also bowed to the pressure.

The full reduction will mean that repayments on an average $300,000 home loan would drop by a further $46 a month.

In a statement announcing the decision, Reserve Bank Governor Glenn Stevens said that while growth in Australia was close to trend in 2012 overall, it had been “a bit below trend in the second half of the year, and this appears to have continued into 2013”.

As a result, the Bank has dipped into its reserves to give the economy a bit of a nudge in the right direction again.

“The Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand.

“At today's meeting the Board decided to use some of that scope.

“It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target”, Governor Stevens concluded.