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The Reserve Bank of Australia, aka RBA, has cut the official cash rate by 0.50points and is now down to 3.75 per cent. This clearly defines an attempt by the RBA to try and stimulate a slowing economy as growth in the world economy slowed in the second half of 2011, and is likely to continue at a below trend pace for the remainder of this year.

This is quite a heavy cut and the Reserve will be hoping that it has maximum impact, says Domain property expert Carolyn Boyd.

It is good news for mortgage holders who were earlier this year hit with out of cycle rises by many lenders. I would assume most lenders will pass on the majority, if not all, of this amount to its customers with ANZ Bank announcing they will be holding off their decision until the second Friday of the month, 11th May 2012.

Each 0.50 per cent drop in interest rates slices about 120 dollars off the monthly interest cost of an average Australian mortgage. If lenders do make cuts, it is a smart idea for borrowers to maintain their current repayment levels.

Many institutions do not automatically adjust repayments down in line with lower rates, and if you think yours might, you should speak with them and ask for your repayment amounts to be kept as they are. It is inevitable that rates will rise again in the future, so this is a great opportunity to pay some extra money off your loan if you can afford to do so.

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