1% Rate Cut by End of the Year ?

What Could This Mean for the Property Market? Depending on how much news you consume, you might have seen articles forecasting interest rate cuts this year, with some predicting a full 1% drop by the end of 2025. These forecasts are largely based on Australia’s improving inflation numbers. Now, without diving too deep into economics, the Reserve Bank of Australia (RBA), the team in charge of setting interest rates, has stated they won’t begin cutting until inflation reaches a satisfactory level. And right now, the figures are looking promising. With global events, particularly in the US involving tariffs, influencing markets, there’s increasing expectation the RBA will move at its next meeting on May 20th.

How Much Will They Cut? There’s some debate over the size of the cut. While 0.25% is standard, many are speculating this round could see a 0.50% drop. In my view, the RBA tends to be cautious, so a larger cut would suggest they feel the need to act decisively. One reason could be the reduced number of meetings this year, 8 instead of 11, meaning fewer opportunities to adjust. While rates aren’t determined by the housing market directly, they heavily influence property movements. So let’s talk about the implications.

The Impact on Repayments Using the CBA repayments calculator: If you were to borrow $800,000 at a current rate of 6.1% on an interest-only loan, your monthly repayment would be approximately $4,066. If the rate drops by 1%, repayments would fall to around $3,399, a saving of $667 per month, or $8,004 per year. That’s after-tax income, potentially equivalent to two months’ wages for the average earner.

What Does This Really Mean? Put simply: more money in people’s pockets means more spending power. While the example shows a saving, the real impact is on borrowing capacity. With cheaper debt, people can borrow more.

Increased Borrowing Power = Higher Prices That increased borrowing power often drives up property prices. How much prices rise depends on the suburb and price bracket, but in general, anything under $1 million tends to see movement in line with borrowing capacity increases, or even more.

Here’s a quick example from the CBA borrowing calculator:

Final Thoughts Whether you’re a buyer, investor, or simply watching the market, these rate movements could mark a significant turning point. As always, staying informed and prepared is key.

If you found this useful or think someone in your network might benefit, please feel free to share. My mission is to help more Australians navigate the property space with clarity and confidence.

• Couple earning $180k combined, no dependents
• At 6.1% interest: borrowing power approx. $917,800
• At 5.1% interest: borrowing power approx. $1,005,800
• That’s an $88,000 jump.