Interest rates slashed

Tuesday October 7, 2008

Interest rates fell from 7% to 6% in a surprise move by the RBA. While an interest rate cut was expected, analysts did not think it would be by a full percent. Original predictions estimated that the y drop would be by 50 basis points. This is the first full percentage drop since May 1992.

Australians with variable loans could benefit from this significant decrease - if Australian banks pass the full reduction on to their customers. Banks have indicated that they will only pass only a part of the cutback.
Such a drastic action by the RBA is to motivate a material drop in costs for borrowers and to incite banks to pass on some interest rate relief.

Lowering the cash rate will hopefully reduce borrower's costs. Australia has felt some of the effects of the recent financial troubles overseas, but this move is one of the measures being taken to help protect Australia's economy from any further financial issues.

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