You’ve been saving. Watching the market. Getting your hopes up… and then comes the announcement: The Reserve Bank of Australia (RBA) has cut the official cash rate to 3.85%.
If you’re a first home buyer, your first thought might be: “Great — does this mean I can finally buy?”
But the reality? It’s a bit more complicated than that. Let’s unpack the opportunity – and the potential traps.
A rate cut should be good news… Right?
In theory, yes. When the RBA cuts rates, lenders often follow suit (though not always), leading to:
- Lower monthly repayments for new and existing loans
- Increased borrowing power, because lower rates improve your serviceability
- A general sense of “now is the time” that often drives buyers to act
For first-home buyers struggling with affordability, that all sounds like a step in the right direction. But there’s a catch. Actually, a few.
Why this rate cut might come back to bite
Lower interest rates don’t just help buyers — they stimulate demand. And more demand in a market with limited supply tends to drive prices up.
Property analyst Louis Christopher, from SQM Research, says we could see housing prices rise by 10% before the end of 2025 — directly linked to renewed demand following the rate cut.
For those already in the market, that’s great news. For those trying to get in — especially first-timers — it’s a reminder that cheap money often comes with a hidden cost: competition.
“I’d Be Pretty Pissed Off” – The Sentiment from the Sidelines
Scott Pape (The Barefoot Investor) summed up the feeling for many young buyers:
“If I was a young person right now, I’d be pretty pissed off.”
Why? Because while rate cuts should make buying easier, they often make it harder.
More buyers = more pressure = higher prices = more debt just to get a foot in the door.
Add to that the ongoing rental crisis, soaring living costs, and stagnant wages, and it’s no wonder many first home buyers feel like the goalposts keep moving.
The smarter path for first home buyers
If you’re in the market, this rate cut can still work in your favour — but only if you approach it with your eyes wide open.
1. Get a real pre-approval
Online calculators are a trap. A proper pre-approval from a lender gives you:
- A firm idea of your budget
- A list of conditions you’ll need to meet
- Confidence to bid or offer with clarity
It also shows you how lenders view your profile — which often differs from how you see yourself.
2. Understand the true cost of buying
Even with a rate cut, the upfront costs of buying remain:
- Stamp duty (unless you’re eligible for concessions)
- Legal and conveyancing fees
- Lenders Mortgage Insurance (if under 20% deposit)
- Building and pest inspections
- Moving and setup costs
A good mortgage broker will help you map these out so you’re not caught short at settlement.
3. Borrow within your comfort zone
Yes, you can borrow more now — but should you?
Be realistic about your lifestyle, job security, and rising costs of living. Rates can go back up. Your mortgage repayment will too.
You’re not imagining it — It is tough
If you’re feeling discouraged, you’re not alone. The frustration is real.
This rate cut may help some — but for many first-home buyers, it simply fuels a cycle where they’re always one step behind.
But don’t give up.
Getting the right advice, preparing thoroughly, and not rushing in emotionally will always give you the edge.
Whether you buy in three weeks or three years, what matters most is that you buy well. And we’re here to help you get there.
*This blog is intended for general informational purposes only. For personalised advice tailored to your unique financial situation, please contact NMC Finance.
