🏦 RBA Cuts Interest Rate to 3.6% Amid Easing Inflation
The Reserve Bank of Australia (RBA) has reduced the official cash rate by 0.25 percentage points to 3.6%, marking its third rate cut of 2025. This decision follows signs of easing inflation and a slight uptick in unemployment, with trimmed mean inflation falling to 2.7% and headline inflation to 2.1%, both within the RBA’s target range.
RBA Governor Michele Bullock noted that the rate cut was a unanimous decision by the board, reflecting confidence in the latest economic data. The move is expected to provide relief to mortgage holders, with banks like Macquarie already announcing they will pass on the full cut to borrowers.
🏘️ Impact on Property Investors
1. Lower Borrowing Costs
- Investors with variable-rate loans will see immediate reductions in repayments.
- Example: A $600,000 mortgage could drop by approx. $90/month.
- This improves cash flow and may allow for refinancing or portfolio expansion.
2. Increased Property Demand
- Lower rates typically boost buyer activity, especially in supply-constrained markets.
- Capital city prices are already rising, with Sydney’s median now at $1.722 million.
- Investors may benefit from capital gains, but rental yields could compress if rents don’t rise proportionally.
3. Strategic Opportunities
- Investors are advised to:
- Reassess loan structures and consider locking in low fixed rates.
- Maximize depreciation claims and review insurance policies.
- Monitor rental demand and adjust pricing accordingly.
💰 Impact on Borrowing Capacity
1. Boost to Loan Eligibility
- A 0.25% rate cut typically increases borrowing capacity by $20,000 for average buyers.
- This is especially helpful for first-home buyers and investors looking to leverage equity.
2. Market Dynamics
- Increased borrowing power may push property prices higher, especially in high-demand areas.
- Experts warn of a widening gap between buyers and sellers, with sellers potentially raising prices in response.
3. Long-Term Considerations
- While borrowing capacity improves, it’s still below pandemic-era highs.
- Economists expect up to two more rate cuts in 2025, which could further enhance affordability.