The Reserve Bank of Australia (RBA) has reduced the official cash rate by 25 basis points to 4.10% following yesterday’s monetary policy meeting.

This decision was widely anticipated, given the decline in annual inflation from 3.6% in the September 2024 quarter to 3.2% in December—bringing it closer to the RBA’s target range of 2–3%. You can read the RBA’s full statement here.

Lenders typically align their variable-rate products with the RBA’s cash rate adjustments, and many are expected to announce rate reductions in the coming days.

If passed on in full, it’s estimated borrowers with a $600,000 home loan will save $92 a month, while those with a $750,000 loan will pocket $115 a month.

The Reserve Bank of Australia announced a rate cut for the first time since 2020. So what now?

AMP has projected there will be three rate cuts this year, and they will be spread out between now and December. 

The head of investment strategy for AMP says the second rate cut will likely take place in May after the federal election.

Buyers are Being Enticed Back to the Market

Tim Lawless, CoreLogic’s research director, said over the near term, the cut would boost sentiment and entice buyers back into the market. 

“The most important thing about the rate cut is the lift in sentiment, and we know historically that consumer confidence and housing market activity are generally closely correlated, so we should see more buyers becoming more active.

The reduced rate is likely to attract more investors and homebuyers to the market, leading to increased competition and upward pressure on prices – in a market that is already tough for investors.

Tuesday’s Rate Cut Expectations Sparked a Surge in Buyer Inquiries

Dr Nicola Powell, Domain’s chief of research and economics, said expectations ahead of Tuesday’s cut had triggered a sharp increase in buyers’ inquiries in January compared with the previous year.

“Buyers’ inquiries have increased by 13 per cent across all the capital cities, which tells me that people are starting their property journeys again.

“We went through a period from late 2023 to around September last year when buyer inquiries were declining, so the fact that we’re starting to see a little bit of improvement is encouraging,” she said.

Auction clearance rates also picked up over the past two weeks, with more than seven out of 10 homes selling successfully under the hammer – the highest level in more than five months, according to CoreLogic.

Ideal Time to Re-evaluate Your Options

With these changes in the market, now may be an opportune time to review your options, as some lenders may offer more competitive rate adjustments than others.

Looking ahead to 2025, further rate cuts are indeed possible, depending on inflation trends, employment figures, and broader economic conditions.

Reach out if you’d like a chat…