Interest rates cuts? Cheaper home loans? How to best read Aussie property right now

Key points of this article:

• Homeowners hope for rate relief from the RBA in 2025.
• Rate cuts may have little effect on home values and sales this year however.
• Property price growth has slowed and buyer activity hasn’t yet picked up. 
• Auctions have started slowly in Jan/Feb presenting a chance for first-time buyers.

Interest rate cuts are on everybody’s mind, but the property and home loan markets never stop. So how can both homebuyers and homeowners get a clearer picture of what’s happening right now?

Let’s take a look at some of the key analysis of late. 

Will the RBA be forced to cut rates?

Corelogic recently noted that a lower cash rate should help bolster Australian housing demand, but doesn’t expect lower interest rates to be the catalyst for renewed growth in home values in 2025.

The trouble is that a lower cash rate is still just a thought at this stage, with most pundits unsure of how the Reserve Bank of Australia (RBA) plans to move in the months ahead. The RBA Board meets to discuss monetary policy on February 17 and 18 and then again on March 31 and April 1, and interest rate cuts will be agenda item No.1.

There is an expectation that cuts will come this year, so when it happens, there’s hope they will boost consumer sentiment, provide relief to mortgage borrowers looking for lower repayments and also boost home loan borrowing capacity. 

Keep in mind, improving home loan repayments significantly might take some time: Corelogic says more than three or four rate cuts are needed to get interest rates back to the pre-pandemic decade average of 2.55%. (At the time of writing the official cash rate is 4.35%).

“If history is anything to go by, certain markets will see a bigger boost from rate reductions than others, and it may be because of market characteristics like price point, location and investor interest.” - Corelogic’s head of research, Eliza Owen.

Where will property prices go in 2025?

The majority of Australia’s real estate professionals (65%) predict house prices will rise in 2025, driven by improving affordability, rising incomes and the potential of cuts, according to a survey by Corelogic.

The firm’s research also highlights that property prices tend to differ around the nation following any given rate cut. For example, while national values increase by an average of 6% for each percentage point decline in the cash rate, Australia is made up of many different markets, some of which see little movement.

“If history is anything to go by, certain markets will see a bigger boost from rate reductions than others, and it may be because of market characteristics like price point, location and investor interest,” according to Corelogic’s head of research, Eliza Owen.

“Relatively expensive markets have historically shown stronger responses to reduced cash rate settings, especially in the house sector.”

Those locations broadly include high-end areas of Sydney and Melbourne and expensive areas of Brisbane, above others. 

Similarly, PropTrack expects price growth in 2025, even with values slumping in recent months. 

“As interest rates move lower this year, boosting borrowing capacities, improving affordability and buyer confidence are expected to drive renewed demand and price growth,” PropTrack says in a recent report. 

“However, the stretched starting point for affordability will likely dampen the uplift in prices compared to prior easing cycles, resulting in the pace of home price growth trailing the strong performance of recent years.”

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Softer prices (and lower rates) should help first homebuyers

KPMG also expects increased buyer activity this year, though it says house prices will rise nationally by just 3.3% over the next 12 months, with a stronger jump of 6% in 2026.

In this way KPMG isn’t as bullish on 2025, highlighting in its latest 6-monthly property report that house price growth will be down on 2024 levels, which saw an average 5% rise nationally. It does expect unit price growth to be largely consistent with last year’s average 4.5% rise. 

This is potentially good news for first homebuyers looking to break into the market. Meanwhile, property owners and investors might at least be happy to hear that price growth will be more pronounced in the second half of 2025, based on KPMG’s forecasting.

The professional services firm also expects varied price growth around the country, with Perth house prices rising by 4% but Darwin seeing only 1% growth.  

Canberra and Melbourne will be solid performers on 3.5% growth each, with Sydney a more restrained 3.3%, Brisbane 3%, while Adelaide and Hobart are expected to be lower at around 2% each, according to KPMG’s analysis. 

In summary, KPMG chief economist Brendan Rynne says that while 2024 was a year of high interest rates, inflation and subdued consumer sentiment, the housing market withstood all those factors and still provided strong price growth, due to demand outstripping supply. 

“Even the much-anticipated ‘fixed-rate cliff' – the transition of mortgage holders off lower fixed rates to higher variable rates – had only had a mild impact and households generally coped well with the rate rises, due to a robust labour market and Australia’s historic low unemployment rate,” Rynne said.

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Softer property auction market – for now

For the time being, buying and selling on the ground is yet to hit its stride and as such, Corelogic reports a quieter auction market generally. For example, the week ending January 26th returned a clearance rate of 56% from 426 auction results across the combined capital cities. 

The clearance rate ticked up more recently in the week ending February 9th, with a combined capital clearance rate of 67% on a lot more auctions, as per Corelogic. This was helped by busier selling activity in Sydney and Melbourne. But what should also be noted is that many properties were sold prior to auction or were passed in – meaning none of the bids met the reserve price. 

This suggests things are still yet to truly warm up and there might be a window of opportunity for younger buyers who could capitalise on weaker price growth and a reduced level of buyer activity in the early months of 2025.

Home loan watch

Of course, an interest rate cut or two in the first half of the year could change that. Should home loan rates become more attractive, it’s likely that more people will jump into the homebuying mix. 

At the time of writing, the average variable home loan rate in the Mozo database is 6.71% for owner-occupied (P&I) loans, while the best available loan in that category is 5.85%.* So if the official interest rate is cut by the RBA, the typical assumption is that many home loan providers will similarly slash rates on their variable products – subsequently reducing these figures.

There is no guarantee of this but 2025 at least is being viewed more optimistically by home owners and prospective homebuyers alike.

If you’re ready to start comparing home loan rates be sure to check out our Home Loans hub page. 

*Rates are based on a $400,000 variable home loan with an 80% loan-to-value ratio.