RBA cuts rates to 0.75%, here’s what it means for you. 

The official Australian interest rate has a zero in front of it for the first time ever.

The Reserve Bank today saw fit to cut the cash rate to a new record low 0.75%, its third cut in five months in a bid to light a fire under the economy.

The move is aimed at firming the weakening job market, igniting wages growth and inflation, and boosting household spending, but a side-effect is an explosive rebound in house prices. But what does it mean for average Australians?

What does this cut mean for mortgage holders?

Major banks are busily considering how much of the quarter-of-a-percent cut to pass on to borrowers, but recent history suggests only a partial cut will be handed out. A 0.25 per cent Reserve Bank cut will mean a lower home loan rate for most borrowers, likely sparking cuts of somewhere between 0.15 per cent and 0.20 per cent.

For most borrowers a cash rate cut would see them finally get their rate below 4 per cent, with the lowest rates in the market likely to come down to between 2.74 per cent and 2.84 per cent.

What does it mean for property prices?

Fueled by the mid-year rate cuts, Sydney and Melbourne property prices jumped 1.7 per cent in September, following similar gains in August, according to the latest CoreLogic data.

After almost two years of price dives – totalling a 15 per cent drop in Sydney and 11 per cent in Melbourne – prices in those cities have now rebounded about 3.5 per cent in the last quarter. With interest rates for investors and owner-occupiers dropping to record lows and prices jumping off their recent lows, a sense of urgency is growing among buyers.

Although housing values are now consistently tracking higher, the national index remains 6.8 per cent below the October 2017 peak, indicating that buyers still have some time to take advantage of improved housing affordability before values return to record highs.

What does the cut mean for savers?

It’s more bad news for those with their money in the bank, with effectively no returns now offered on big bank savings accounts outside of bonus and introductory rates. With the base savings rate for most online savers below 0.15 per cent and shrinking towards zero, it’s time for savers to look around the market for a better deal.

Will the RBA keep cutting from here?

Plenty of senior economists think so. In fact, The Bank will cut again by the end of this year and then once more in February 2020, according to AMP Capital chief economist Shane Oliver – who sees the economic outlook worsening. This will likely be the absolute bottom though as banks are unlikely to be able to pass on rate cuts beyond that point and negative rates are likely to be counterproductive.