Brokers have commended the banks’ swift move to pass the bulk of yesterday’s rate cut straight back to the borrower.

Barry Oxley, director of Lending Specialists in Melbourne, told Mortgage Business yesterday’s events were “a shock to the system” but a welcome one.

“The experts were hoping for half a per cent from the RBA, with a maximum of half that to be passed on by the banks and here we are getting 0.80 per cent,” he said.

A 0.50 per cent cut to the official cash rate was widely tipped with the banks expected to hold on to at least 0.25 per cent to offset higher funding costs.

Mark Melick of Auspak said it was a bold move on behalf of the Reserve Bank to deliver such a substantial cut and a significant gesture from the banks.

“The banks do get bagged out a lot but in this case I think they’ve done the right thing,” he said.

Mr Melick is now hopeful that the substantial reduction to the banks’ lending rates will boost borrower confidence.

“It’s a bit of an early Christmas present,” he said.

“Activity between now and Christmas should now be quite strong, led predominantly by borrowers looking to save and refinance.”

Lending Specialists’ Glen McKissack was also optimistic that borrowing activity would pick up.

“All of a sudden rates are looking a lot lower than they were a few months ago. Those borrowers who have been thinking about buying for some time are a lot more likely to take action now.”