The Reserve Bank says there’s little risk that the lowering of the cash rate to 1.75% from 2% will further stimulate the housing market. 


The RBA says the Australian Prudential Regulation Authority’s ongoing tightening of lending standards – including recent decisions by three major banks to cut foreign lending – and cooling of the housing markets in Sydney and Melbourne are doing enough to subdue the market. 


“In reaching the decision (to cut the cash rate), the board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate,” Reserve Bank Governor Glenn Stevens says in a statement. “At present, the potential risks of lower interest rates in this area are less than they were a year ago.”


The property industry has welcomed the rate cut, saying it will not only boost the economy but help first-home buyers. 


“Both the Sydney and Melbourne markets are slowing so the RBA is less concerned by suggestions of overheating and is now focused on broader economic fundamentals,” says LJ Hooker’s chief executive Grant Harrod.