What homeowners and buyers need to know about RBA’s upcoming interest rate decision

Long-suffering homeowners could be set for home loan repayment relief in as little as days. Experts have revealed what you should do after the Reserve Bank meets on Tuesday.

The right mortgage moves could have big benefits long term for homeowners.

Victorians are being told 2025 is a year to “stretch” to buy a home and to ride the variable rate roller coaster down rather than lock in a fixed figure.

Declaring we are “at the top of the mountain”, mortgage brokers have also advised those who can afford to keep paying today’s mortgage repayments even after a cut that they could save years and tens of thousands of dollars off their loan by doing so.

However, The Finance Family director Tony van de Kerkhof said with many of their customers “hanging on by their teeth and nails” he had fears that if the Reserve Bank decided to hold on Tuesday it could hammer hope in households across the city and potentially cause relationship breakdowns and even divorce.

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How one decision saved me at least $50k on my mortgage

Mr van de Kerkhof said he only rated the odds of an interest-rate cut at 50 per cent amid signs the Federal Reserve in the US might have cut rates too soon.

If there is a reduction he advised only those who were “sleepless at night” and needed certainty in their budget for their mental health to lock in a fixed rate as banks always set these at a level above where they thought variable rate loans would end up.

Estimating a rate cut would boost borrowing capacity by about $11,000 for those who could borrow $500,000 today, the broker added that now was the time to stretch to buy the best home you could.

Finance Family director Tony van de Kerkhof said with many of their customers “hanging on by their teeth and nails” he had fears that if the Reserve Bank decided to hold.

“We are at the top of the hill now, if you can afford the repayment at 6 per cent or more, you will be ahead as rates decline,” he said.

Loan Market mortgage broker Jacob Decru said for many people it would pay to check in with their bank or broker this week, even if there wasn’t an interest-rate cut — as a 5.89 per cent interest rate could be possible, though most people were paying more than 6 per cent.

“And if you can afford to keep paying at your old level, keep paying it,” he said.

“For a $500,000 loan, if you pay an extra $80 a month over a 30 year period, that saves just under $47,000 in interest and two years off your loan.”

For Victorians’ about $614,000 typical new home loan, according to latest Australian Bureau of Statistics figures, continuing to pay the balance of a 0.25 per cent cut could equate to a $33,701 saving over the life of a 25 year loan — and shorten it by a year and three months.

INTEREST RATE ADVICE

+ Do not fix your rate now, most lenders believe variable rates will become much cheaper this year;

+ Expect anywhere up to five 0.25 per cent rate cuts between now and February 2026;

+ Keep paying your mortgage at today’s level if you can afford it, this will put you ahead long term and save you tens of thousands of dollars and years off your mortgage;

+ If you are buying a home, don’t be afraid to stretch now — your mortgage is likely to become cheaper across the year;

+ Increased borrowing capacity is likely to push up home prices rapidly after a cut, potentially $10,000 in a month in some areas, be prepared to move quickly;

2025 could be a good year to chase your dream home, with mortgages to get cheaper.

+ Research online if your lender typically passes on a rate cut quickly, or if they might take up to three weeks, so you know when you might benefit;

+ Ask your bank for a better rate, even if the Reserve Bank doesn’t cut;

+ Speak with a mortgage broker if you think you can get a better rate, some lenders are offering 5.89 per cent;

+ If there isn’t a rate cut, be wary that the financial strain and loss of hope could impact other parts of people’s lives — be kind.

Source: Loan Market, The Finance Family

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Originally published as What homeowners and buyers need to know about RBA’s upcoming interest rate decision