RBA cut official cash rate to a historic low 1.25% at June 2019 meeting

The Reserve Bank of Australia have cut the official interest rate to a historic low 1.25% at its June meeting.

It's the first time the cash rate has been cut since August 2016 when it went from 1.75% to 1.5%.

The Federal Treasurer Josh Frydenberg has personally urged the nation's biggest banks to pass on all the 0.25 percentage point cut in official interest rates.

CoreLogic head of research Tim Lawless said the move was widely expected, with the focus now no doubt turning to mortgage rates and how low they will go.

"Mortgage rates for owner occupiers are already around the lowest level since the 1960’s and lenders are generally expected to pass on most, if not all of the cash rate cut to mortgage interest rates. 

"Lower mortgage rates, together with the likelihood of lower borrower serviceability assessments if APRA delivers on a relaxation to the base serviceability rate later this month, as well as renewed confidence following the federal election, are likely to see an improvement in housing market activity. 

"However, with credit policies remaining tight, the stimulus of lower rates isn’t likely to be as effective in kick starting the housing market as what we have seen in the past. 

"Borrowers are facing much closer scrutiny on their income and expenses as lenders become less reliant on HEM (Household Expenditure Measure) benchmarks, and comprehensive credit reporting is providing lenders with greater transparency around borrower debt levels and credit standing. 

"Overall, the latest rate cuts together with lower serviceability assessments for borrowers and greater confidence following the federal election should help to support an earlier than expected trough in housing values, but we aren’t expecting a rapid reversal in house price declines due to ongoing tight credit policies and, more broadly, economic uncertainty as global trade tensions escalate.