Australia’s Interest Rates Right Now, Market Mood

Australia’s Interest Rates Right Now, Market Mood, And What A Cut (Or Surprise Rise) Would Mean For Sellers, Buyers And Investors

By Ellen Blundy | August 2025

As at 11 August 2025, Australian interest rates sit at an RBA cash rate of 3.85%, following quarter-point cuts in February and May and a surprise July hold. With inflation (CPI) at 2.1% year-on-year in the June quarter and unemployment at 4.3%, the property market is edging into a cautiously positive phase. Here’s the short version of what’s happening, the rate cut vs rate rise outlook, and what it means for sellers, buyers and property investors.

The quick snapshot

• Cash rate: 3.85% (two cuts in 2025; July hold).
• Inflation: CPI 2.1% y/y; 0.7% q/q—inside the RBA 2–3% target band.
• Jobs: Unemployment 4.3% (seasonally adjusted), participation 67.1%.
• Mortgage rates: Average new owner-occupier rates around the mid-5s (weighted average), still well above the cash rate and product-specific.
• Market mood: Confidence improving but below neutral; buyers remain price-sensitive.
• Home values: PropTrack Home Price Index shows a record national median of $827,000 in July, up 0.3% m/m and 4.9% y/y; auction clearance rates running above 70%.
• Rentals: SQM Research vacancy rate 1.3% nationally—historically tight and supportive of yields.
• Credit settings: APRA serviceability buffer still +3 percentage points above product rate, with limited exceptions.

Outlook: cut, hold or rise?

With inflation within target and the labour market cooling, markets lean toward another 0.25% rate cut in coming meetings. The RBA has flagged a gradual, data-dependent easing cycle and may not cut as deeply as offshore peers. A surprise rate rise is unlikely near-term but remains a tail risk if services inflation re-accelerates or external shocks lift costs.

What it means for sellers

• Demand first, prices later: Any cut tends to lift market sentiment, pre-approvals and open-home traffic before it moves prices.
• Execution matters: With clearance rates 70%+, well-priced, well-presented campaigns are attracting multiple bidders; over-reaching on the guide slows momentum.
• Listings are patchy: Supply varies by suburb; tightly held family pockets and downsizer-friendly homes can still command premiums.
• Tactics:

o If rates hold: Lean on education (replacement cost, rental scarcity, recent comparable sales). Negotiate on terms—settlement timing, lease-backs—rather than headline price.
o If rates cut: Consider bringing launches forward to ride the confidence bounce; expect shorter days on market for A-grade homes.
•

What it means for buyers

• Borrowing power: A 0.25% lender pass-through on a $600,000, 30-year P&I loan (from 6.00% to 5.75%) trims repayments by roughly $96/month (about $1,150/year). A 0.50% move saves ~$191/month. Product, fees and whether you keep repayments unchanged will affect your result.
• Competition, not just capacity: The bigger change after a cut is usually more active bidders. Be approval-ready and move quickly on quality listings.
• Home loan strategy: With average new-loan pricing in the mid-5s, many borrowers prefer variable or split loans for flexibility. Compare comparison rates, fees and offset/redraw features—not just the headline.
• If rates hold: You may face less immediate competition post-decision; agents are often more flexible on terms.

What it means for investors

• Rental market: A 1.3% vacancy rate supports cashflow and yields; a cut would further improve net positions for neutrally geared assets.
• Capital growth: National prices at a record high reflect low stock and solid demand in family-buyer markets like Adelaide, parts of Brisbane and Perth. Focus on owner-occupier appeal, transport, schools and employment nodes.
• Loan settings: Investor rates remain above owner-occupier rates; weighing interest-only vs P&I alongside offset strategy is prudent.
• Serviceability: The +3% APRA buffer can cap borrowing at higher LVRs—stage moves (equity release, then purchase) and maintain cash buffers for repairs or vacancy.

Why this cycle feels different

1. Inflation in band, cautious RBA: Expect measured easing, not a rapid slashing cycle.
2. Structural rental tightness: Low vacancy underpins yields and demand for quality, low-maintenance stock.
3. Tighter, smarter credit: The APRA serviceability buffer keeps lending disciplined, moderating boom-bust swings.

Bottom line

• If the RBA cuts: Anticipate a sentiment bounce, stronger buyer enquiry and a nudge up in borrowing power.
• If the RBA holds: The market likely grinds forward, helped by low rental vacancy and uneven supply.
• For everyone: Be deal-ready—sellers with sharp pricing and presentation; buyers with clean files and flexible terms; investors with buffers and quality assets.