What do RBA interest rates and the expansion of the Home Guarantee Scheme mean for the housing market?

The Reserve Bank of Australia (RBA) held the cash rate steady in September, keeping it at 3.60% after its 25 basis‑point cut in August. This decision marks a pause in the easing cycle as the RBA monitors inflation signals and economic momentum.

Markets had widely anticipated the August cut, and many economists had expected further reductions later in 2025. However, sentiment is shifting with inflation pressures still present and labour market conditions remaining relatively firm, the case for near‑term cuts has softened. Some forecasts now suggest that any further cuts might not come until late in the year, with the cash rate drifting toward 3.35% or lower by early 2026.

The latest rate movements are already having an impact on housing demand, particularly among first-home buyers and investors, with many re-entering the market after being priced out during peak rate conditions. Property values have now been rising for several consecutive months, and the trend is expected to continue as we approach the spring selling season.

Also expected to fuel buyer activity are upcoming changes to the government’s Home Guarantee Scheme (HGS), which comes into effect from 1 October 2025. These changes remove income caps, significantly raise property price thresholds, and lift the 10,000-place cap entirely, meaning all Australian first-home buyers can now be approved for a home loan with just a 5% deposit and no Lenders Mortgage Insurance (LMI).

HGS property price caps have been increased for Melbourne to $950,000, Sydney to $1,500,000, Queensland to $1,000,000, as well as significant increases in every other region. For properties at or below this threshold, competition is expected to be fierce. Keen purchasers may find that using a buyer’s agent will yield optimal results.

With all these changes to the market, borrowers and investors may find that now is an opportune time to review their position. Whether you're looking to refinance, purchase, or would like help finding the best property for your needs, our team is here to guide you through your next steps with expert advice. To speak with us, contact our lending and property specialists on 03 8508 7800.

 

This information is general in nature and is provided by Partners Wealth Group. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.