Why We Won’t See Another Covid-Era Boom

On Tuesday, the RBA kept its official cash rate at 3.85%, pausing after back-to-back cuts in February and May. That decision marks a clear break from 2020, when rates fell to zero and super-low fixed mortgages hovered around 2%. Back then, falling prices and rock-bottom rates triggered a “supercharged rebound,” with buyers snapping up homes as soon as restrictions eased.

Today’s environment is different. As AMP’s chief economist Shane Oliver points out, affordability constraints are far more severe. Even though each 0.25% cut theoretically adds about $9,000 to borrowing capacity—$18,000 for first-home buyers after two cuts—many households simply can’t stretch their budgets further. Rather than unleashing a fresh price surge, lower rates now risk pushing buyers already at their limit into even tougher positions.

The Numbers Behind the Headlines

REA’s senior economist Anne Flaherty expects this hold to slow price growth, at least compared to the post-cut bounce we saw in early 2025. National dwelling values are still up 3.2% since January, tacking on roughly $26,000 to the median home price. Yet those gains are uneven—markets like Sydney and Brisbane continue to outperform, while Melbourne and Hobart hover below peak.

Key takeaways:

• RBA rate hold at 3.85% signals a more cautious approach.

• National prices +3.2% YTD, but affordability pressures mount.

• Each 0.25% cut ≈ $9,000 extra borrowing power, though benefits often evaporate into higher prices.

What This Means for You

We’re back in a “normal” rate-price relationship: modest rate cuts lift prices modestly, rather than fuelling runaway growth. For buyers, that means two things:

1. Do your sums ruthlessly. Stretch budgets only where value is clear—don’t chase every “cheap” suburb.

2. Look beyond headline rates. Local factors—zoning changes, upcoming infrastructure, rental yields—will dictate true affordability and upside.

The Role of the Buyer’s Agent

While the market isn’t in super hot FOMO-mode, specialist guidance still matters. A buyer’s agent can:

• Crunch the numbers to find pockets where affordability aligns with growth potential.

• Negotiate smartly around settlement terms and inclusions to ease cash flow.

• Spot value early, including off-market opportunities that dodge bidding crowds.

In a market where every $1,000 of borrowing power is precious, that extra edge can be the difference between winning your ideal property or missing out.

If you’d like to know how to gain the edge on your competition, reach out today.

— Oli