The Reserve Bank of Australia has cut the cash rate by 25bps today – which should ease mortgage stress and the rate of credit rating defaults, provided banks pass on the reduction.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.

Today Australian Broker reported the cut in its story RBA maintains cutting course and says weak retail figures and low inflation has contributed to the cut.

“It is a relief to see that the RBA finally seems to have grasped the severity of the situation facing our main employment industries like construction and retail,” 1300 Home Loans’ John Kolenda said.

While Kolenda conceded that the rate cut would not be a panacaea for consumer sentiment, he said it would provide a much-needed boost.

“This rate cut is not the end of the road by any means but it does mean that homebuyers and consumers will be a little less cash-strapped and might step back a bit from their siege mentality,” he said.

It seems from experts we can determine that all but those related to mining and other resource sectors are struggling or slowing, so a drop in interest rates will be welcome, particularly for those teetering on the realm of defaults. A cut like this can represent a significant saving for consumers, provided that banks mirror the RBA cut, which in the recent past has not readily been the case.

Unfortunately, for those living with bad credit history, these cuts will be negligible and they will still be paying a significant amount more in interest through the non-conforming sector.

So any actions to prevent the number of likely defaults is extremely heartening if mirrored in interest rate cuts by banks.

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