Interest rates have been a key focus for buyers, investors, and homeowners in Australia, with growing speculation about potential cuts in 2025. Following a series of hikes over the past two years, many are wondering: Will the Reserve Bank of Australia (RBA) reduce interest rates this year? If so, by how much, and what will it mean for the property market?
To break down these questions, our Principal Buyer’s Agent, Joe Pullos, sat down with Adam Rakowski, Principal & Founder of Ortus Financial, in an exclusive interview. They discussed the potential for interest rate cuts, their impact on homebuyers and investors, and how to prepare for the shifting economic landscape.
In this article, we cover:
- What’s expected in the upcoming RBA announcement for February 2025 and what it signals for interest rates.
- Expert insights from Adam Rakowski on whether we could see a 1% rate cut by Christmas 2025.
- How lower rates could impact borrowing power, home values, and investment strategies.
- What buyers and investors should be doing right now to stay ahead of the market.
If you’re looking for strategic advice on navigating the property market in 2025, this is a must-see!
Video interview
The current interest rate landscape
February 2025 RBA announcement predictions
The RBA’s latest interest rate decision due to come on the 17th-18th of February 2025 has been closely watched, as many economists predicted the first signs of a rate-cutting cycle. While inflation has been cooling, global economic uncertainty and domestic factors have influenced the RBA’s stance on monetary policy.
Here’s what we know from the prior RBA statement:
- The current cash rate remains at 4.35%, unchanged since November 2023.
- The RBA acknowledged that inflation has moderated, bringing it closer to the target range of 2-3%.
- Analysts predict that rate cuts could start as early as mid-2025, depending on economic conditions.
- Global central banks, including the US Federal Reserve and the European Central Bank, have begun easing rates, which could influence the RBA’s future decisions.
Adam Rakowski noted in the interview that Australia’s core inflation is lower than in New Zealand, the UK, and the US, all of which have already started cutting rates. This suggests that the RBA could follow suit sooner rather than later.
What banks are signalling about interest rates
Even before the RBA makes a move, some Australian banks are already adjusting their rates. St. George and Westpac recently dropped their one-year fixed rate to 5.99%, indicating that lenders are anticipating cuts in the near future.
This is a strong signal to borrowers that now may be the time to start preparing for a lower-rate environment, whether through refinancing or making strategic investment decisions.
Will we see a 1% rate drop by Christmas 2025?
One of the biggest questions in the Australian property market is: Will interest rates drop by 1% by the end of 2025?
Expert forecasts from Adam Rakowski
In his discussion with Joe Pullos, Adam Rakowski provided a detailed prediction based on economic trends and historical data:
- Current interest rates (4.35%) are still higher than typical long-term levels.
- Based on inflation trends and global rate-cutting movements, he expects a total reduction of 50 basis points to 1% by December 2025.
- This could mean interest rates falling to 3.35% by the end of the year, improving borrowing conditions.
- Historically, the RBA has been more conservative than other central banks, meaning it may take a cautious approach to rate cuts.
What a rate cut means for borrowers
If Adam’s predictions hold true, a 1% reduction in interest rates could have significant effects on homebuyers and investors:
- Increased borrowing capacity: A lower interest rate means cheaper loans, allowing borrowers to qualify for larger loan amounts.
- Higher property prices: Historically, a 1% rate cut can lead to a 6% increase in home values, especially in high-demand markets.
- Investor confidence boost: Lower rates often lead to greater market activity, as both local and overseas investors see Australian property as an attractive asset.
While a rate cut won’t immediately change the market overnight, it will gradually stimulate demand and shift market sentiment in a more positive direction.
Market impact
Buyers & first-home buyers
- Lower rates will increase borrowing power, making it easier for first-home buyers to enter the market.
- More buyers entering the market could drive up demand, leading to price growth.
- Pre-approved buyers are already preparing—Adam noted that his firm has 44 pre-approved clients waiting to buy as soon as conditions improve.
Property investors
- Investors could see a boost in rental yields as mortgage repayments become more manageable.
- Historically, a 1% rate cut has led to a 6% increase in property values, making it a favourable time to invest.
- Overseas investors and expats are already showing increased interest in Australian property due to favourable exchange rates and tax conditions.
Homeowners & refinancing
- Many homeowners will look to refinance at lower rates, saving money on repayments.
- Homeowners with variable-rate mortgages will immediately benefit as their rates decrease.
Expert advice: how to prepare for the changing market
- Don’t wait for official rate cuts—start preparing now.
- Work with brokers and buyer’s agents to ensure you’re in the best position to secure a good deal.
- Monitor lender movements—banks often adjust rates before the RBA does.
- Lock in pre-approvals early to take advantage of improved borrowing power.
The property market is poised for a shift, and interest rates will play a crucial role in shaping 2025’s investment landscape. With expert insights from Adam Rakowski and the upcoming RBA forecasts, buyers and investors have a clear opportunity to plan their next steps strategically.
Don’t miss out on the full discussion—watch the interview with Joe Pullos and Adam Rakowski for deeper insights into how interest rate changes could impact the market. If you’re looking for expert guidance on property buying on the Gold Coast, reach out to COAST Buyer’s Agency today and let us help you secure the right property at the right time.
