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Hey Cate,

yes, ok, interest rates.

No doubt, the property and economic news of the week.

What Happened?

So, the RBA surprised - not in what they did, but more in what they said.

Predictably they decreased interest rates by 0.25%.

Good news and widely predicted.

However, in their commentary, for the first time in years, they disclosed a 0.5% decrease was on the cards this week, and that with inflation in hand, they expect to be able to reduce rates further.

Cue the gushing commentary:

·        "RBA cut ‘straps rocket’ to property market"  realestate.com.au 22/4/25

·        "Rate cuts and election promises to push house prices up even higher" The Age/SMH 24/5/25

Why the excitement and “change of heart”?

When it comes to interest rates, these are the only two obs you really need to know:

1.     Inflation rate

-        The RBA has a legislated “target” rate of 2-3%.

2.    

UnUnemployment rate

-         This is seen as a key contribution to inflation and like Goldilocks’s porridge, it is best not too hot or cold.

There is no expressed target but current thinking of 4-4.5% is balanced.

All the rest of what you read and hear is fluffing around these two points.

This one picture usefully has these two:

The RBA loves the economy being not too hot and not too cold.

What it means for you?

1. Lower loan repayments

The obvious and good news!

Here is a table of interest rate repayments across loan amounts and interest rates.

Tip: if you can keep your existing loan repayments up, you will knock years off your loan.

2. Higher borrowing capacity

Here’s a rough guide:

For every 0.25% decrease in interest rates I estimate borrowing capacity should increase by 4%.

All else being equal a 1% decrease in rates (likely?)  would increase capacity by 15-20%.

If you have more current debt, it will be more than that.

Action: let me know and we can assess this for your situation

3. Rising property prices

As mentioned last week, it feels great when property prices rise if you own a property.

It’s not good for those wanting to buy and to a lesser extent those looking to invest further.

Action: Get in before this fully plays out.

Winter can be an especially good time to do this. There are fewer buyers and more motivated sellers.

Those Three Bears?

I always like the life maxim “things are never as bad as they seem to be, and never as good as they seem to be”.

It’s not to scare you, but let’s keep it real:

To me, there are three key risks:

1. That first graph above is a snapshot, not a movie

 i.e. we are in a snapshot and inflation could bounce up or unemployment could derail. Prediction is hard!!

2. Property prices go too hot, too fast.

Unaffordability becomes an even bigger problem, and there are social and political ramifications. The RBA may need to curb further rate reductions.

3.The US Wildcard.

 U.S. economic policy is currently... unpredictable (to put it kindly). Global ripples happen fast — and it’s not always rational.

As I read this week, it takes a psychologist, not an economist to know what the US economic policies will be….

That wasn’t so bad. Was it?

Takeaways for You:

If you’re renting, saving, looking to invest, or just waiting… you’ve got a narrowing window where:

• Interest rates are reducing

• Prices are rising — but haven’t exploded (yet)

• Winter means less competition

If buying is something you want in the next 6 months — now’s the time to prep and position.

Because when this market moves, it tends to move fast — and nobody wants to be the one who waited just a bit too long.

Those of you in Adelaide, Brisbane, or Perth,  over the last few years are only too familiar with this.

Want to see what's possible for you?  

Just use this link to book a call:

https://bit.ly/tri-state-client-meet

Have a Great Week!!