Interest rate cut sparks immediate excitement—but real impact may be limited

The recent interest rate cut announced by the Reserve Bank of Australia (RBA) triggered an immediate surge of excitement among homebuyers and investors, but experts caution that the practical impact on borrowing capacity may be less significant than many hope.

According to property experts from the Property Nerds podcast, the announcement immediately sparked a flood of phone calls and emails from eager homebuyers and property investors.

“Within minutes of the announcement, my phone was ringing non-stop,” said co-host Jackie, emphasising how highly anticipated the rate cut had been.

However, despite the excitement, Jackie clarified that the rate reduction would likely only slightly boost buyers’ borrowing capacity. “If you’re already tapped out financially, this small cut won’t suddenly unlock a large new borrowing limit,” he explained. “While some borrowers might see a marginal increase in purchasing power, it’s not the major boost some might expect.”

Jackie highlighted that for an average mortgage of around $800,000, borrowers would save roughly $130 per month—helpful but not transformational.

Property investor and co-host Arjun also emphasised that banks typically pass on the first rate cut in full but warned borrowers not to assume all lenders would follow suit.

“Banks usually pass on the first cut completely because customers are closely watching,” Arjun noted. “However, subsequent cuts might see banks passing on smaller portions, protecting their margins.”

Despite the limited immediate impact on borrowing capacity, the hosts agreed that the psychological boost from lower rates could encourage hesitant buyers to enter the market.

“People waiting specifically for rate cuts might realise they could have acted sooner, missing out on potential market gains,” Arjun added.

The hosts also discussed how self-employed borrowers have more flexible financing options today, noting recent policy shifts by banks to simplify income verification for business owners.

“Many lenders now accept one year of financial statements or regular wage payments as sufficient proof of income, significantly streamlining borrowing for the self-employed,” Jackie pointed out.

With banks and borrowers closely monitoring future interest rate movements, Arjun highlighted historical trends indicating rates could continue decreasing this year.

“Historically, once rates start falling, they often continue to fall rapidly,” Arjun said, advising borrowers and investors to remain proactive rather than reactive.

Ultimately, the Property Nerds suggest that the key to successful property investment lies in ongoing, consistent action rather than waiting for economic signals.

“Whether rates are rising or falling, consistent investing is key. Don’t rely solely on market timing,” Arjun concluded.