The recent Reserve Bank of Australia (RBA) interest rate cut to 3.85%

The recent Reserve Bank of Australia (RBA) interest rate cut to 3.85% will support housing markets, but don't expect a boom in housing prices until affordability improves.

The cash rate marks a further shift toward more accommodative monetary policy.

With both headline and core inflation now within the RBA’s 2–3% target range — and no signs of a wage-price breakout despite ongoing tightness in the labour market — the RBA’s decision to lower rates for the second time in three meetings was widely expected.

Borrowers are likely to benefit from this move through lower mortgage rates. The average variable rate for outstanding owner-occupier loans is expected to fall to around 5.81%, reducing repayments on a $750,000 loan by approximately $81/month.

Beyond the immediate financial relief, the rate cut is also expected to lift consumer confidence. While the Westpac–Melbourne Institute monthly sentiment index has shown some volatility — particularly following the Liberation Day tariff announcements — historically rate cuts have tended to boost sentiment.

Source: CoreLogic Rate cut will support housing markets, but don't expect a boom in housing prices until affordability improves | CoreLogic Australia