Will a rate cut make a big difference for first-home buyers?
In February, the Reserve Bank of Australia (RBA) finally cut interest rates after an aggressive rate hike cycle. Many reports suggest this will improve affordability for buyers. But will it really make a significant difference for first-home buyers?
How a rate cut helps
A lower interest rate certainly provides some relief for first-home buyers. It translates to lower monthly mortgage repayments, which can ease the financial burden and potentially make homeownership more attainable.
For instance, according to PropTrack, the February cut of 25 basis points could save a homeowner $120 a month on a $750,000 loan. Over the life of a 30-year loan, this adds up.
Lower rates can also increase borrowing power, as banks assess affordability based on repayment capacity. With cheaper loans, lenders may approve higher amounts, giving buyers access to a wider range of properties.
Challenges that remain for first-home buyers after a rate cut
While a rate cut is good news, it won’t solve all the hurdles first-home buyers face.
For one thing, property prices have been rising – up 8.3% nationally between January 2024 and 2025, according to CoreLogic. On top of this growth, lower rates could push prices even higher, as more buyers with increased borrowing power compete for limited stock.
For another, there are strict lending criteria which means that, even with cheaper loans, you typically need a sufficient deposit, a good credit history and the ability to meet monthly repayment obligations. Even with a rate cut, these factors remain key barriers to entry.
What can first-home buyers do now?
Instead of solely relying on rate cuts, take a strategic approach to homeownership. Here are some tips:
Plan ahead: Set a clear budget, boost your savings and focus on long-term financial goals.
Get pre-approval: Obtaining pre-approval from a lender provides clarity on borrowing capacity and can strengthen your position in the market.
Consider alternatives: Exploring alternatives like rentvesting (renting where you want to live and buying an investment property elsewhere) or using government initiatives like the Home Guarantee Scheme can provide pathways to homeownership.
Stay informed: Keep up to date with the market and understand that conditions are always changing.
Work with a professional: Consider approaching a mortgage broker for help with your loan application. They can help you compare loan products and find a loan with terms that suit your current financial situation and long-term goals.
If you’re looking to buy your first home, Eventus Financial can help. To find out how – and see why we are an award-winning mortgage broker in Sydney with hundreds of 5-star Google reviews – schedule a no-obligation consultation with Alex.