What will rate cuts mean for homeowners and buyers?

Last month, we noted that property prices were cooling in some markets across Australia. However, investors who are waiting for prices to fall further might be disappointed. CoreLogic suggests that any downturn in values "is likely to be shallow and short-lived."

This is especially true given that interest rates are expected to fall as early as this month, potentially reigniting housing demand. The result could be a narrow window of opportunity for investors to buy now before rate cuts bring more competition to the market.

That said, it appears the genie is already out of the bottle, with new investor loan values reaching $11.6 billion in the September quarter, a 29.5% increase compared to September 2023, according to the Australian Bureau of Statistics (ABS). According to a statement from the ABS, “Over the past 18 months, the average size of loans approved increased for both owner-occupiers and investors. However, the growth in investor loans was also driven by increases in the number of loans being approved.

“Investor activity remains at high levels in response to the recent growth in house prices and rental yields.”

On the finance side, the implications of a rate cut are significant for landlords and prospective investors. Craig Betalli, Senior Finance Specialist from Our Broker, explains that for landlords the gap between interest costs and rental returns is expected to narrow. In other words, if your investment property is costing you $1,000 a month, it will likely cost you less after the rate cut.

While this scenario is great news for landlords, it also improves the borrowing capacity for aspiring investors, making property purchases more accessible.

A rate cut will also ease pressure on residential borrowings, further boosting the borrowing capacity of prospective investors. This situation may prompt some homeowners to consider starting or expanding their real estate portfolios by purchasing investment properties.

If you're thinking about purchasing an investment property before autumn, get in touch with your local Raine & Horne office. For financing, Our Broker is here to help – call 1800 913 677.