Interest rate cut could save 250 suburbs $5k+ a year

News.com.au

17-05-2025

New homeowners could get more than $400 a month back into their pockets in more than 250 Sydney suburbs if expected rate drops come to fruition – but there is a sting in the tail that make their home aspirations harder to attain.
Analysis from comparison site Compare The Market has revealed just how much new buyers could save on their home loans in each suburb if rates were to drop 0.5 per cent in the coming months – a move widely expected by the major banks.
Such a cut would make loans for homes priced at the current median more than $5,000 a year cheaper in over 250 suburbs – including Parramatta, Castle Hill, Marrickville, Epping, Hurstville and Randwick.
Additional Mortgage Choice research showed home buyers across the state will also get an average increase in their borrowing power of about $45,000 with a 0.5 per cent cut.
'Shouldn't get one': Fury over rate cut hopes
See how much a rate cut would cut off a loan in your suburb HERE
But coming rate cuts would also bring a twist as prices are expected to be pushed higher.
Following the February cash rate cut, the first rate reduction in over four years, Sydney property prices lifted to a new high, recording a median price of $1.118m in April, according to PropTrack data.
Compare the Market property expert Andrew Winter said a rate drop at the RBA's Tuesday meeting would likely push prices up again.
He explained that cheaper credit would lead to bigger offers on properties, particularly in highly sought after areas.
'The market in Sydney has been extremely resilient, and that's largely because there isn't enough supply to keep up with demand,' he said.
'These markets have performed well in less-than-ideal conditions. Another round of rate cuts is likely to add fuel to the fire.'
Mortgage Choice numbers laid bare the kind of effect a rate cut would have. A homebuyer who now could qualify for a $795,000 loan – the current average loan size in NSW – would be able to borrow nearly $840,000 with a half a per cent cut to typical loan rates.
Mr Winter said aspiring buyers may be anxious to 'get a foot in the door' now before market conditions become too competitive. But he warned that the capacity to borrow more money would not make buying a house easier for most people.
'The main hurdle for most first-time buyers is raising a deposit which can be extremely challenging when value growth outpaces wage growth in such an extreme way,' Mr Winter said.
'The good news is there are a number of low-deposit and stamp duty incentives open to first home buyers.
'There may be a rush to beat the 'fear of missing out' frenzy. Remember, it's nearly impossible to strategically time the market. The best time to buy is when you're ready.'
Young couple Kristy Kumar and Marco Ip recently purchased their first home in Oran Park and said interest rate cuts encouraged them.
'The idea of rate cuts gave us a bit more confidence,' Ms Kumar said.
'While we weren't trying to take out the maximum loan we would be approved for, as we didn't want to be in a position where we couldn't meet our monthly repayments, we are trying to get ahead as fast as we can and will use the cut to keep our payments the same and pay off our debt faster.'
Their broker, Owl Home Loans director Aidan Hartley, said rate cuts had seen a huge influx of first home buyers seeking approvals.
'I've been doing this a while and I've never been thrown as many contracts from new buyers,' he said. 'There's a big sense of urgency because a lot want to get in (to the market) before cuts because they're taking out variable rates,' he added.
'We did a lot of pre-approvals that are finally buying. My sense is that there was a lot of people waiting on the sidelines and now that rate cuts are looking likely, they are taking action.'
Suburb (houses) Median value Monthly repayments after 0.50% rate cut Monthly $ Reduction
Parramatta $1,875,070 $8,517 $476
Castle Hill $2,298,997 $10,443 $584
Marrickville $2,165,240 $9,835 $550
Epping $2,490,788 $11,314 $633
Hurstville $1,786,156 $8,113 $454
Randwick $3,437,576 $15,615 $873
Baulkham Hills $1,825,083 $8,290 $464
Ryde $2,436,858 $11,069 $619
St Ives $3,053,664 $13,871 $776
Maroubra $2,944,591 $13,375 $748
Paddington $3,540,979 $16,084 $900