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Interest Rates Fall

Its official. The moment Australian home owners have been waiting for. Interest rates have been cut.

Almost 750,000 Australians will now experience their first decreased mortgage payment as the Reserve Bank reduced interest rates today (Tuesday).

The RBA cut interest rates by 25 basis points, the first decrease in almost seven years. The official cash rate is now seven percent.

Rates have risen 12 consecutive times since May 2002. During that period, 740,000 people have taken out their first mortgage.

The Treasurer, Wayne Swan, repeated his warning to the big banks to pass on the cut once it has been granted. "Those 740,000 Australians have never experienced an official cut in the RBA rate, so they most certainly will be expecting the banks to pass any relief on in full," he told Parliament.

The cut comes as the Rudd Government pushes ahead with a $76 billion infrastructure plan to pump up the economy.

Prime Minister Kevin Rudd detailed the plan to business executives last night, ahead of the RBA's board meeting today.

Mr. Rudd was already claiming credit for the rate cut yesterday, arguing that the Government's tight budget policy had enabled the RBA board to act.

On Sunday, Wizard Home Loans became the first lender to cut its variable interest rate in seven years.

The Federal Government wants the banks to follow the Reserve Bank's lead.

Prominent economists are suggesting that interest rate cuts could continue for two years.

In other financial news, St George Bank has lowered its one to five-year fixed interest rates by as much as 76 basis points to take effect as of Wednesday.

Last week the four big banks lowered their fixed rates for the second time in less than a month.

For more on what your banks are doing, check out our bank rates table.

For more on Interest Rates, click here.

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