Potential RBA move may raise loan limits for households but could push property prices higher
A widely expected Reserve Bank of Australia (RBA) rate cut of 25 basis points could lift borrowing power for some households by as much as $49,000, according to new modelling from property data company Domain.
The anticipated reduction of the official cash rate to 3.60% would deliver immediate savings for borrowers, with the largest increases in loan capacity seen among dual-income households.
“Next week’s decision will be one to watch,” said Nicola Powell (pictured), chief of research and economics at Domain. “A cut will hand would-be home buyers a boost in borrowing power, while easing the pressure for current homeowners.”
Domain’s analysis shows that a 25bp rate cut would raise borrowing limits by $4,000 for individuals earning $50,000 annually, and by nearly $49,000 for households with two incomes totalling $400,000. The modelling also indicates that a total reduction of 75 basis points from current levels could increase loan capacity by more than $150,000 for high-income earners.
However, analysts warn that the boost in borrowing power may intensify competition in a housing market already facing supply shortages, potentially pushing prices even higher.
“With more money chasing too few homes, prices are set to rise again,” Powell said. “Our latest forecast is predicting a 6% rise in house prices and 5% in unit prices by mid-2026. Without urgent planning reform and faster approvals, demand will continue to outpace supply and price pressures are likely to continue.”
While lower interest rates may improve affordability on paper, the limited number of available properties –especially in major cities – could make it harder for buyers to secure a home.
With pressure mounting for the RBA to act, any reduction in the cash rate is expected to spur further buyer activity, making home ownership more attainable for some, but potentially less affordable for others as prices continue to rise.
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