RBA Rate Drop: What it Means for You

The Reserve Bank of Australia has announced a rate drop of 0.25% today. This newsletter will guide you through what the rate cut will mean for you, how the rate cut will affect the property market and lower mortgage rates.

Mark's Insights

Hear from Mark about his predictions for the market moving forward.

Lower Mortgage Rates 

The RBA rate drop and what it means for you and how the property market will be impacted. 

A rate cut typically leads to lower variable mortgage rates, as banks often pass on the reduction to borrowers. This means lower monthly repayments for new and existing borrowers with variable-rate loans, improving affordability

Are there more reductions forecast?

Going forward, the RBA have said that there is uncertainty in the financial markets and have not indicated if further rate reduction will be happening later in the year. A very much a month by month assessment.

Property Market Shift 

With lower interest rates, lenders may allow buyers to increase borrowing, as a result of reduced repayments. This may expand the pool of eligible buyers, especially first-home buyers.

Cheaper credit often stimulates higher demand for property, which can lead to price increases, especially in competitive markets. This could be a double-edged sword: while borrowing is easier, property prices may rise, potentially offsetting affordability gains.

What does this mean for you?

Current home loan owners

If your home loan is variable, then your minimum repayment will change. The majority of lenders will not automatically reduce your repayments and you will need to manually change your direct debit or transfer.

Alternatively, if your cash flow allows, you can choose to keep making the same repayment amount as you have been. This will lower your home loan interest and shorten the overall repayment period.

New borrowers

For first home buyers, investors and or those that looking to upgrade their home, a reduction in interest will generally increase your borrowing capacity with lenders. However, on the flip side we generally see an increase in property prices following higher lending limits.

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