22-05-2025
RBA cut ‘straps rocket' to property market
The Reserve Bank of Australia's latest interest rate cut has given Aussie homeowner's plenty of reason to rejoice.
However, experts warn Tuesday's decision could prove to be a double edged sword that could see investors dominate the market, while first home buyers continued to feel the housing squeeze.
Money expert and mortgage broker Julian Finch, founder and CEO of Finch Financial, said while rate cuts were often perceived as a means to enhance housing affordability, they typically had the opposite effect.
'People think rate cuts will make housing more affordable, but they rarely do,' he said.
'They drive demand, increase borrowing power and send prices up.
'That's what we're seeing now and it's only going to intensify if the RBA cuts again.'
The RBA on Tuesday cut the cash rate by a quarter point to 3.85 per cent in a bid to ease pressure on mortgage holders, grappling with high living costs and elevated interest repayments.
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The RBA's Michele Bullock during a press conference following the board's announcement to cut the interest rate by 0.25 percentage points. Picture: NewsWire / Nikki Short
On an average Aussie loan of just above $600,000, a single rate cut of 0.25 per cent will save about $1200 a year, while the latest cut could provide savings of around $2400 a year.
With at least one additional rate cut likely by year's end, Mr Finch said the RBA's next move would have a significant psychological effect on the market, including the likely impact on the structural imbalance between supply, demand and access.
'We may get one more rate cut, but that won't fix affordability. What's needed is smarter housing policy, increased supply and lending practices that prioritise long-term stability over short-term boosts,' he said.
'Another cut might keep the economy moving but if it fuels another property price surge, we risk leaving more Australians behind.'
Leading finance expert and CEO of Finch Financial Services Julian Finch.
Mr Finch said the latest RBA cut had investors and cashed up buyers laughing all the way to the bank.
'The latest RBA move has already kickstarted the market and another rate cut is going to strap a rocket to it. Affordability is going to get worse, not better,' he said.
'Investors are in a stronger position to move quickly; they understand the game. A rate cut opens the door for them to re-enter, refinance and scale.
'Meanwhile, first home buyers are trying to keep up while facing rising prices and intense competition for limited stock.'
Mr Finch urged borrowers to avoid emotional decisions based on rate movement hype and instead focus on long-term strategy and sustainability.
'If you're buying, don't just ask how much you can borrow, ask how much you can comfortably repay if rates shift back up in the next two or three years,' he said.
'If you already have a mortgage, now is the time to renegotiate, refinance or explore fixing part of your loan. Don't wait for the next rate change to act.'
