The Reserve Bank of Australia (RBA) announced a 0.25% interest rate cut, bringing the cash rate to 4.11% TWD. Australia's four major banks quickly followed suit, announcing a pass-through rate cut. This will mean lower mortgage payments nationwide, significantly impacting those looking to buy or sell properties.
Buyers' borrowing capacity increases, leading to more property choices
After this interest rate cut, banks will consider the amount buyers can afford when calculating their servicing capacity, meaning they may be able to get a higher mortgage. In other words, prospective buyers will be able to borrow more money, enabling them to choose more expensive properties.
Market analysts point out that the interest rate cut will allow buyers to obtain higher loan amounts, helping them to further expand their budgets and bid for more desirable properties. For homebuyers, with improved financial capabilities, they may consider choosing better locations or larger units, thus improving their overall home buying options.
Mortgage holders can choose to repay their mortgage early if their expenses are reduced.
The interest rate cut will also directly benefit existing mortgage holders as their mortgage payments will be reduced.
Based on a $600,000 loan with a 25-year repayment period, the monthly payment would be reduced by approximately $92, resulting in annual savings of approximately $1,104.
On a $750,000 loan, monthly repayments would be reduced by $115, saving $1,380 per year.
On a $1 million loan, monthly repayments would be reduced by $154, resulting in annual savings of $1,848.
"Customers can use this opportunity to pay off their loan early or put the savings into an offset account to reduce future interest costs," said Jason Yetton, head of consumer banking at Westpac.
Declining account interest rates affect deposit returns
At the same time, banks also lowered deposit interest rates, affecting investors who rely on deposit interest income.
Westpac said it would cut its Life deposit rate by 0.25% to 4.75%, while its eSaver deposit rate would also fall.
National Australia Bank (NAB) said its deposit rate is still under review.
The Commonwealth Bank of Australia (CBA) announced that it will maintain its existing preferential interest rate of 4.60% for 10-month term deposits, but the offer will only be for short-term periods.
Market analysts believe that although the decline in deposit interest rates is not good for investors, the overall property market may benefit from the interest rate cut, and some investors may turn to the real estate market in search of higher returns.
Looking ahead: The market expects another interest rate cut this year
The market generally expects two more interest rate cuts in 2025. If this prediction comes true, borrowing costs will fall further, potentially driving up property prices. However, economic uncertainty persists, and buyers and sellers must carefully consider market fluctuations when making decisions.
In summary, this interest rate cut is beneficial to mortgage holders and buyers, and may bring a new round of vitality to the property market, but sellers also need to adjust their strategies to adapt to market changes.
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