Following interest rate cuts by the Reserve Bank of Australia (RBA) in recent months, a further 100 point (one per cent) cut has just been announced, making it the lowest rate since December 2001.

Australian Retailers Association (ARA) executive director Richard Evans said the fourth cut in as many months, bringing the cash rate to 4.25 per cent, is more great news for families with mortgages who are already benefiting from lowering petrol prices and now look forward to a cash payment from the Federal Government next week.

"The RBA’s decision to cut interest rates yet again indicates our leading financial regulators are listening to retailers hard hit by months of reduced consumer demand. But now we urgently require the interest rates on credit cards to be lowered," said Evans.

New research has shown consumers will still be using credit in high numbers over the Christmas period and some relief from high interest rates on cards would certainly be feasible, he said.

"Hopefully this will help turn consumer confidence around and start the upwards trend for retail spending after successive months of stagnant and declining growth, as confirmed by the 0.2 per cent growth in October retail trade figures released today.

"We now see strong growth to return by September 2009, but the rest of the economy lags three to six months behind in the retail sector cycle. This means there may not be good news for other industries until December 2009/January 2010," said Evans.

The rate cut also means an early Christmas for home buyers, with most lenders expected to pass this onto their customers in full.

“This cut represents a timely relief for home buyers and especially first home buyers, making it a cut of three per cent in total since September,” said Australian Mortgage Options managing director Robert Projeski.

“Affordability has definitely improved and with rental demand high, I am sure we will see more property purchases again after a time of lower sales figures.”

The Real Estate Institute of Australia (REIA) has just released its Housing Affordability Report showing an improvement of affordability of 0.7 per cent since the September quarter, taking it to a 38.8 per cent portion of household incomes to meet mortgage repayments.

The NAB and Commonwealth Banks announced they will be passing on the full cut, whereas Westpac will keep it at 80 points.

“If the full cut was passed on, home owners will be better off by nearly $200 per month on an average $300,000 mortgage. A nice little boost to the Christmas budget,” said Projeski.

“Apart from a surge in property purchases, I expect more mortgagees looking at refinancing now – given the lower rates.”