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Property experts anticipate the upcoming rate cut will ease borrowing costs and gently lift property market activity without triggering a sharp rise in home prices due to ongoing economic caution.
Commentators have unanimously agreed that the central bank will continue to ease interest rates, with the official cash rate set to drop to levels not seen since mid-2023.
The Reserve Bank of Australia’s (RBA) May monetary policy meeting decision will likely bode good news for borrowers as the board seems poised to deliver yet another 0.25 bps cut to the official cash rate.
Currently at 4.1 per cent, this would bring the official cash rate down to 3.85 per cent, back to the same rate seen almost exactly two years prior between the May 2023 and June 2023 monetary policy decisions.
According to the ASX RBA Rate Tracker, markets have priced a 96 per cent of a 0.25 bps reduction and a 4 per cent chance of another hold in the cash rate (as of 16 May 2025).
The central bank’s “patient approach” appears to have effectively quelled the post-pandemic inflation surge, according to HSBC chief economist Paul Bloxham.
“Core inflation has fallen back into the RBA’s target band without a recession or large retrenchment of the jobs market. The economy is close to fully employed and dis-inflating.”
“This is the good news. But there are deeper problems,” Bloxham said.
He added public demand was a driver of much of the economic growth over recent years, however, productivity has “been dismal” with per capita incomes falling.
“To lift living standards, a revival of the private sector will be needed. Rate cuts will not be enough. Structural reform is needed,” he said.
Commenting on the implications for the home loan market, chief economist Dr Diaswati Mardiasmo noted that many banks have already begun reducing interest rates on mortgage products, suggesting a high level of confidence for a rate cut and a push to stay ahead of the competition.
“My feeling is that it will move the market and make transactions happen a little bit quicker, but not suddenly a floodgate of transactions and a massive shoot up in price.
“That said, we do still have cautious buyers in the market, after all 92.1 index points is not a positive reading (of 100 index points), and property prices are still the highest that many places have seen. And of course nothing has really changed with the high cost of living,” she added.
Bell Partners Finance managing director, Mark Stevenson, said some had predicted a larger rate cut of up to 50 basis points following US President Donald Trump’s threat of a global trade war. However, he noted the RBA might take a more cautious approach due to potential effects on property markets.
“That would be a major step for the RBA as since Michele Bullock took over as governor in September 2023, there has only been one rate cut in February this year, and that was just a quarter of a percentage point,” he said.
“The US Federal Reserve chairman, Jerome Powell, has resisted further easing of monetary policy because of uncertainty about the direction of economic growth and inflation, and Michele Bullock has previously called for caution in her outlook with the RBA’s priority to keep inflation in check.”
Judo Bank’s economists Warren Hogan and Matthew De Pasquale remarked that the real surprise will be “no change in the cash rate following stability in global markets in recent weeks and signs of ongoing inflation pressures in the economy”.
“The RBA also will produce an update of their forecasts, which will provide the market with a sense of what to expect over the months ahead.
“The guidance embedded in the February forecasts [were] for the cash rate to remain above 3.5 per cent for the foreseeable future,” they added.
Echoing this sentiment, Otto Dargan, CEO of brokerage Home Loan Experts, said economic conditions and data (namely the March quarter CPI print, labour force and WPI data) support a rate cut rather than another hold.
“House prices would probably increase if rates were cut, and yes, this would be a challenge for an already expensive housing market,” he said.
“The RBA does consider the effect of its monetary policy decisions, including rate cuts or hikes, on house prices, but this is viewed through the lens of its primary mandates of inflation, employment and financial stability, rather than targeting house prices themselves.
“Its primary focuses are inflation, stability of the Australian dollar, employment and the economic prosperity and welfare of the Australian people.”
This article was originally featured in REB’s sister brand Broker Daily.
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