The RBA cut the cash rate from 4.35% to 4.1% was an outcome widely predicted by economists prior to the February announcement. Although the initial cut is not expected to have a massive direct impact on affordability, the shift into the easing cycle could have a more significant impact on activity, with consumers building potential future rate cuts into their housing budgets and therefore boosting sentiment for local homeowners, businesses, and buyers alike.

Interest Rates: What's Predicted?

The Big Four banks are united in their forecasts for 2025, predicting that further rate hikes are off the table and anticipate further cuts to the new official cash rate of 4.10% by the end of the year. ANZ expects a further reduction of 0.25%, while NAB is more optimistic, forecasting a further drop of 1.00% by the end of 2025. For homeowners, each 0.25% reduction translates into savings of approximately $103 per month on a $641,416 mortgage—the national average. These savings can restore buyer confidence and offer much-needed financial relief. However, the impact of lower interest rates goes beyond personal finances. Reduced rates also help businesses by lowering borrowing costs, which can ultimately ease the cost of everyday goods and services.

The Waiting Game vs. Taking Action

Many buyers are sitting on the sidelines, waiting for interest rates to drop before making their move. However, savvy buyers are already taking advantage of current conditions. History shows that those who act ahead of the market often reap the greatest rewards. A recent Compare the Market survey revealed that nearly one in five buyers regretted waiting, having received poor advice to hold off until prices dropped further. As rate cuts materialise, buyer confidence will surge. With increased borrowing capacity and greater access to finance, market activity is expected to ramp up in 2025. As more people enter the market, competition for properties will naturally push prices upward.

Impact on Property Prices

It is expected that an influx of buyers with improved borrowing power will intensify competition in the real estate market. We expect the established home market to experience renewed demand as the gap between the cost of building a new home and purchasing an existing one narrows. Land prices are also expected to strengthen, and the incentives that developers currently offer will diminish as demand grows. Historically, periods of falling interest rates have coincided with increased market activity, reducing buyer incentives and applying upward pressure on prices for both land and established homes.

A Long-Term Perspective

Interest rates have always played a critical role in the property market. In the last 40 years, we’ve seen dramatic fluctuations—from a peak of 17.5% in January 1990 to a historic low of 0.1% during the COVID-19 pandemic, before rates began climbing again in May 2022. While interest rates affect affordability, buyers remain in control of key decisions: what to buy, where to buy, and how long to hold onto a property. A wellresearched, long-term property investment can deliver significant returns and help smooth out the ups and downs of economic cycles.

The Importance of Homeownership

The dream of homeownership may seem out of reach for some, with many Australians believing they will never be able to afford a home. This sentiment is not without reason. A recent report by the Grattan Institute highlights that retirees who rent privately in Australia face significant challenges in achieving long-term housing security. Two in three retirees who rent are living in poverty, even after a 27% increase in government rental assistance over the past two years. For those able to enter the market, purchasing property remains one of the best long-term strategies for financial stability and security.

What’s Next?

As interest rate reductions unfold throughout 2025, we can expect increased buyer activity, rising property prices, and a stronger Bendigo market. Those who act early and invest for the long term are likely to benefit the most. Whether you’re a first-time buyer or a seasoned investor, staying informed and prepared is key to navigating the changing market and making the most of upcoming opportunities.