RBA Rate Cuts: What this Means for You

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For the first time in over four years, the Reserve Bank of Australia (RBA) has cut interest rates. On February 18, 2025, the RBA lowered the cash rate by 25 basis points to 4.10%. This is the first cut since November 2020, when rates dropped to historic lows during the pandemic.

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Why did the RBA Rates Cut?

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The RBA had previously maintained its policy rate at 4.35% since November 2023 after 13 consecutive hikes aimed at controlling inflation. Inflation has cooled faster than expected, falling to 2.4% in December from 2.8% in September.

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Tuesday’s decision was widely anticipated by financial markets, as government bonds had. Meanwhile, GDP growth has been weak, rising just 0.3% last quarter. To support the economy, the RBA decided to ease borrowing costs. 

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Impact on You as Homeowners and Buyers

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If you have a variable-rate mortgage, this cut could lower your repayments. A 0.25% drop on a $600,000 loan could save around $100 per month. Fixed-rate mortgage holders won’t see an immediate impact but may get relief when refinancing. Lower rates make borrowing cheaper, encouraging more buyers to enter the market. If you're planning to buy, now is a good time to secure a loan before competition pushes prices higher. 

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Also, it should be noted, the Australian dollar strengthened slightly to 0.6341 against the U.S. dollar following the RBA rate cut. Meanwhile, government bond yields fell, with the 10-year bond yield dropping nearly 20 basis points since mid-January, reflecting expectations of further easing.

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Will Property Prices Rise?

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Rate cuts typically support price growth as more buyers enter the market. However, with slow economic growth, price increases may take time. The impact will vary by location and demand. Investors may also take advantage of lower borrowing costs, further influencing price movements.

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Future Rate Cuts

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While the RBA has begun its easing cycle, it has lagged behind other major global central banks that started cutting rates in late 2024.

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Abhijit Surya, senior APAC economist at Capital Economics, expects the easing cycle to be "short-lived," predicting only two rate cuts in total, bringing the terminal cash rate to 3.60%.

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Governor Michele Bullock pushed back on market expectations for multiple cuts, stating, "I want to be very clear that today’s decision does not imply that future rate cuts along the lines suggested by the market are coming." She described market pricing as "unrealistic," emphasizing that the RBA needs more data before making additional rate decisions.

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The RBA will continue monitoring domestic and global economic developments before making further policy adjustments.

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“Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remains the case,” RBA stated in its press release.

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What Should You Do Now?

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Homeowners should check with their lender if repayments will drop and consider refinancing for a better deal. Buyers may want to enter the market before competition rises. Investors should review their portfolios as lower rates could drive market activity.

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The RBA rate cut is good news for borrowers and homeowners. While further cuts are uncertain, this move provides relief after years of hikes. Whether buying, selling, or refinancing, staying informed is key.

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Need expert advice? Get in touch with our team at Search Property today and organise a FREE discovery call. 

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