Interest rate cuts may benefit Australian homeowners despite global economic uncertainty

Australian homeowners could benefit from potential interest rate cuts even as global economic uncertainty looms due to international trade tensions.

Economists suggest property owners may see advantages in two ways if the global economy slows down.

The Reserve Bank of Australia may cut interest rates to stimulate the economy, reducing mortgage repayments for homeowners.

The big four banks each forecast four cash rate cuts this year, a view shared by Treasurer Jim Chalmers.

“The next Reserve Bank interest rate cut in May might be as big as 50 basis points,” he said.

Four rate cuts would return approximately $5000 annually to homeowners with an average loan of $665,000.

For those with $1 million mortgages, common in Sydney and southeast Queensland, the savings could reach about $7600 per year.

These cuts could also boost property values as buyer borrowing capacity increases.

According to Finder.com.au, typical new buyers could have approximately $47,000 more to spend following rate cuts.

My Housing Market economist Andrew Wilson said Australia has historically seen property price increases during economic downturns.

“Australian housing markets are very sensitive to rate changes, especially rate cuts,” he said.

“Historically prices go up following interest rate cuts, even during times of great uncertainty, because issues of sentiment can wane when the realities of improved affordability hit.”

Ray White economist Nerida Conisbee said economic upheaval had changed interest rate expectations.

“As of 8 April, markets anticipate an almost certain 0.5 per cent cut at the next RBA meeting on 20 May,” Ms Conisbee said.

“Such reductions would benefit mortgage holders significantly and will almost certainly direct more money into the housing market, supporting both housing supply and price growth.”

LJ Hooker research analyst Mathew Tiller noted that housing market prospects might outperform the broader economy if rates are cut as predicted.

“We’ve already seen the impact of one rate cut earlier this year, with buyer confidence lifting and prices edging higher,” Mr Tiller said.

“If the big four banks’ forecasts of four rate cuts this calendar year come to pass, cheaper finance would provide a strong tailwind for the housing market.”

However, Tiller cautioned that positive impacts could be diminished if economic fallout severely affects the Australian economy.

“While lower interest rates will support market activity, the overall strength of the housing market will ultimately depend on the broader health of the economy,” he said.

REA Group economist Anne Flaherty pointed to housing undersupply as a factor supporting continued price growth.

“The worsening undersupply of housing in many markets combined with high demand is expected to drive up competition and push prices higher,” Ms Flaherty said.

She added that economic uncertainty often drives more investors toward property markets.

“With growing uncertainty and higher volatility in the stock market, we may see more people turn to property as a more secure investment in the current market,” Ms Flaherty said.

Conisbee noted that global economic complexity makes forecasting difficult.

“The broader economic outlook remains exceptionally complex. While interest rate cuts typically strengthen property markets, the impending US recession threatens to constrain global economic growth, potentially increasing unemployment in Australia,” she said.

Finder.com.au home loans expert Richard Whitten warned that potential rate cuts should be viewed in context.

“Let’s be clear, the reason we think the RBA will cut rates is because of the economic damage caused by the tariffs. So it’s not a cause for celebration even if lower rates are a big relief for borrowers. Economic slowdown hurts everyone,” Mr Whitten said.