RBA cuts official cash rate by 25 basis points

Those hoping to achieve home ownership may be encouraged by the latest decision on interest rates, which has the potential to lead to home loan savings.

The Reserve Bank of Australia (RBA) reduced the official cash rate yesterday (December 4) by 25 basis points to three per cent, effective today.

In his statement, RBA governor Glenn Stevens said that the full effect of earlier measures to ease monetary policy had yet to be seen.

Mr Stevens said this further reduction would "help to foster sustainable growth in demand and inflation outcomes".

This is the fourth time the RBA has acted to reduce interest rates this year and its decision was met with favourable reaction from several industry associations.

Master Builders Australia chief executive Wilhelm Harnisch hoped this most recent cut would lead to improved confidence among home buyers and investors.

"The building industry is banking on [it] to act as a circuit breaker to flagging confidence and underpin the momentum for a housing recovery in 2013," said Mr Harnisch.

According to Housing Industry Association chief economist Harley Dale, such a recovery is vital to Australia's chances of transitioning to "more balanced growth with less reliance on resources investment".

Mr Dale said that interest rate cuts in October and now December improved the prospects of an upturn in the housing market in 2013, but that further government action on taxation reform and productivity improvement would also be needed.

The Real Estate Institute of Australia (REIA) said the RBA's announcement would be a "great boost" for Australian homeowners and those thinking of buying property.

REIA president Pamela Bennett said that though housing affordability had been on the rise for the past five months, the market remained relatively subdued.

She said the latest rate cut could help make home ownership more achievable for those considering a first home loan and would give these potential buyers "more incentive to enter the market".