18th February 2025: In some much-needed good news for first home buyers, ahead of the 2025 Election, the RBA has delivered their first rate cut of 0.25%, bringing the cash rate to 4.10%.
Let’s break down what this month’s RBA meeting decision means for first home buyers:
Increased borrowing capacity
The RBA decision has meant that first home buyers now have more power when it comes to securing a property with lower interest rates. Your borrowing capacity will improve as the lender’s assessments rates will fall in line with the RBA rate cut. In some cases, your borrowing capacity will improve by tens of thousands of dollars.
Lower mortgage repayments
If you have recently bought your first home, the rate cut will help you as your minimum monthly repayments will decrease if your lender passes on the rate cut.
e.g. If you borrowed $700,000 for your first home, your repayments would decrease by approximately $130 per month
See what first home buyer rates are available now
Property market sentiment
For those aspiring first home buyers looking to buy their first home, the rate cut will boost sentiment in the market as more people have a higher borrowing capacity. This can be good and bad news, as the competition will be greater for property buyers, however, it may also lead to more properties coming onto the market as sellers feel more confident about getting a higher price for their homes.
Higher property prices
While the rate cut makes borrowing cheaper, it can also lead to increased competition in the housing market, driving up property prices. This could offset some of the benefits of lower interest rates for first home buyers. As further rate cuts are expected in 2024, it could be the right time for you to consider purchasing your first home as prices could increase towards the end of the year,
Will interest rates continue to fall in 2025?
All major banks in Australia (ANZ, Commonwealth Bank, NAB & Westpac Bank) are predicting that interest rates will continue to reduce as the year progresses. The Big 4 banks are also predicting the RBA cash rate to fall to below 3% in 2025. This means that as an aspiring first home buyer your rate could start with a 4 in 2025, which will immensely help in reducing your minimum monthly mortgage repayments.
In summary, the RBA’s decision to cut interest rates has implications for both savers and home loan borrowers. It’s essential to stay informed and consider how this impacts your financial situation. Speak to a FHBA Coach for more information.
How will it impact property prices?
Generally speaking, when the RBA Cash Rate is falling, this can fuel demand for property. Whilst interest rates were previously stable, property prices have not changed much, in fact in some states such as WA & QLD they have increased substantially. With further rate cuts expected to fuel demand for property as consumer’s borrowing power increases, this may result in higher median prices.
As a first home buyer, you do have many options to get into the property market, sooner than you may think! Find out more by clicking here to see what options are available to you:
What rates are on offer now?
The good news is that over the past few months, some lenders have cut their advertised fixed rates to below 6% and variable rates will now also start with a 5. Australian lenders have a good track record of predicting which way the interest rates are going to go in the future; therefore, this is a good sign for aspiring first home buyers looking to buy their first home in 2025. If you are looking to take advantage of the 5% FHBG Scheme, FHBA has access to some special offers under this scheme with access to all the FHBG lenders and rates starting from 5.59%.
At FHBA Mortgages, you can compare home loans by clicking on the button below or alternatively you can book a call with an FHBA Coach. Our Coaches will be able to give you a tailored quote based on your credit history & deposit levels.
Written By,
First Home Buyers Australia
