28 Feb 2025

RBA Cuts Rates: What This Means for Property Investors and Landlords

The Reserve Bank of Australia (RBA) has officially cut the cash rate to 4.10%—the first rate reduction since November 2020. This move marks a shift in monetary policy, but what does it mean for property investors and landlords?

While lower interest rates typically mean cheaper borrowing costs, we are still waiting to see how banks respond and whether further cuts are on the horizon. Investors must now consider how this shift impacts rental yields, property values, and long-term investment strategies.

Will Banks Pass on the Rate Cut?

The big four banks—Commonwealth Bank, Westpac, NAB, and ANZ—have already confirmed that they will pass on the full 0.25% rate cut to their variable home loan customers.

Commonwealth Bank (CBA) – 0.25% reduction (effective 28 February 2025).
Westpac – 0.25% cut (effective 4 March 2025).
NAB & ANZ – 0.25% reduction (effective 28 February 2025).

For investors with variable-rate investment loans, this means lower mortgage repayments—but whether this will significantly impact rental returns will depend on market demand, rental supply, and how lenders adjust investor loan rates.

How Much Will Investors Save?

A 0.25% reduction might seem minor, but it can make a noticeable difference over time, particularly for those with large mortgages.

A $600,000 investment loan could see a repayment reduction of approximately $97 per month (The Australian).
A $1 million investment loan could result in savings of around $162 per month.

For some investors, this reduction in expenses could offset rising rental costs, improving cash flow. However, if lenders do not extend the cut to investment loans as generously as to owner-occupiers, the impact may be less significant.

Will This Affect Rental Prices?

Lower interest rates typically encourage more investors to buy property, which could increase the supply of rental homes over time. However, in the short term, the impact on rental prices will depend on local market conditions.

High-demand areas – Rental prices are expected to remain strong, as vacancy rates continue to be low.
Suburbs with increased investor activity – More supply may slow rental price growth, but this will take time to materialise.

For landlords, rental affordability remains a key factor. With tenants already stretched by the cost of living, pushing rents higher may not always be a viable option. Instead, securing long-term tenants and reducing vacancy periods should be a priority.

What’s Next? Are More Rate Cuts Coming?

While this rate cut is a step toward easing financial pressure, the key question now is whether more cuts will follow.

Current Inflation Trends: Inflation has dropped to 2.4% as of December 2024, finally within the RBA’s target range of 2–3% (RBA).
Future Rate Cuts: Analysts predict at least one more rate cut by mid-2025, potentially reducing the cash rate to 3.85% by June and 3.60% by September (Reuters).
RBA’s Cautious Approach: The RBA has signalled that future rate reductions will depend on how the economy responds. If inflation remains stable, more cuts are likely. However, if inflation starts rising again, the RBA may hold off.

For property investors, this means playing the long game. While there is potential for further mortgage relief, it’s not guaranteed, so careful financial planning remains essential.

What Should Property Investors Do Now?

With rates starting to ease, investors should take this time to reassess their financial strategy. Whilst acquisitions may be a consideration, the focus should be on optimising existing portfolios and improving cash flow.

✔ Review your loan structure – If your lender is slow to pass on the rate cut, consider refinancing to secure a better deal.

✔ Use this opportunity to get ahead – Keeping repayments at pre-cut levels can help reduce debt faster.

✔ Monitor rental pricing and tenant demand – Focus on tenant retention strategies to ensure consistent occupancy and rental income.

✔ Plan for potential future rate changes – While another cut may be coming, be prepared for market fluctuations and unexpected economic shifts.

Maximising Stability in a Changing Market

For property investors, this rate cut provides some welcome relief, but the focus should be on long-term stability rather than expansion. With interest rates likely to shift again in the coming months, the best strategy is to review your financial position, secure competitive lending rates, and maintain a strong rental strategy.

Now is the time to evaluate your investment goals, optimise cash flow, and position yourself strategically for the year ahead. If you need assistance with rental management, tenant retention, or market insights, our team is here to help.

Get in touch today to discuss how you can make the most of these market changes and future-proof your investments.