RBA’s May cash rate decision: what buyers, sellers and renters need to know

The Reserve Bank of Australia (RBA) has delivered a second interest rate cut for 2025, trimming the official cash rate by 0.25% to 3.85%. This follows the February cut and signals a shift in the economic tide as inflation begins to settle and housing conditions moderate.

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While the cash rate is still relatively high by historical standards, the RBA’s decision comes at a time when inflation is finally moving back within target. The latest figures from the Australian Bureau of Statistics show that headline inflation eased to 2.4% in the March quarter, while the core “trimmed mean” (the mean once you move the most extreme price changes) measure fell to 2.9% – sitting comfortably within the RBA’s preferred 2–3% range for the first time since 2021.

Despite a surprisingly strong labour market, with 89,000 new jobs created in April alone, the RBA has acted pre-emptively to ensure the economy stays on a sustainable path. Home values remain high, but the pace of growth has slowed. CoreLogic’s Home Value Index reached a new peak in April, though monthly growth cooled to just 0.3%. Meanwhile, rental pressures – while still intense – are showing early signs of easing, with national vacancy rates edging up to 1.3%, according to SQM Research.

So what does this mean if you’re buying, renting, selling, or investing in property right now?

For buyers: more breathing room

For Australians looking to purchase property, this rate cut is a welcome reprieve. Lower interest rates directly reduce mortgage repayments and increase borrowing capacity, giving many would-be buyers a better chance of entering the market.

“We’re expecting most lenders to pass on the reduction to borrowers,” says Australian Finance Hub CEO Shane Petros. “For the average mortgage of $800,000, that’s a saving of around $120 per month – a welcome reprieve for many households feeling the pinch. For current and future homeowners, this move could be a key moment to reassess loan structures and take advantage of lower borrowing costs.”

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Banks have already begun trimming fixed-rate home loans in anticipation of the RBA’s move, and competition among lenders is heating up. According to PEXA, over 118,000 new home loans were settled in the March quarter — a 4.4% rise on the same time last year — suggesting buyer interest is picking up.

This could be a particularly helpful window for first-home buyers, with many lenders offering incentives like cashback offers and waived fees. But with more buyers returning to the market, competition is also likely to increase. Homely users can stay ahead by setting up listing alerts tailored to their preferences, helping them move quickly on the right properties as conditions improve.

For renters: small signs of relief

While interest rate cuts don’t directly reduce rental prices, they can help ease the pressure in the longer term. When rates fall, landlords face lower mortgage repayments, which can lessen the need for steep rent increases.

After years of record-low vacancy rates, there are now early signs of change. In April, the national vacancy rate rose to 1.3% – still tight, but the highest it’s been in over a year. Some capital cities and regional areas have even seen advertised rents plateau or drop slightly, suggesting that we may be nearing a ceiling on rental prices.

That said, competition for rentals remains high and relief will take time. For tenants, the key is staying informed. Homely’s suburb reviews can be a valuable tool to find affordable pockets with increasing supply, especially for those seeking better value or a foothold in high-demand areas.

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For sellers: A more active market

If you’re planning to sell your home, the rate cut is good news. Lower interest rates generally lead to increased buyer activity, which can help support or even lift property values.

We’re already seeing signs of this. Home prices continued to climb in April, with CoreLogic’s index reaching record levels. Every capital city recorded growth last month – from 0.2% gains in Sydney and Melbourne to 1.1% in Darwin – suggesting broad-based resilience in the housing market.

As rates fall and buyers return to the market, sellers may see higher open home attendance, stronger auction clearance rates, and quicker sales in the coming months. If you’re listing your property, now’s the time to find an agent that can move with these favourable market conditions. 

For investors: Better cash flow and cautious optimism

Investors stand to benefit from this rate cut, with lower mortgage repayments improving cash flow across rental portfolios. Investor activity has already been on the rise. In the March quarter alone, over 91,000 home loans were refinanced – a 12.5% increase on the year prior – as landlords moved to secure more competitive rates.

Yields remain solid, particularly in markets like Perth, Adelaide, and Brisbane, where housing remains more affordable and demand for rentals is strong. However, rent growth is beginning to slow – down to around 3–4% annually after the double-digit gains seen in 2022 and 2023 – so investors shouldn’t assume rents will continue rising at the same pace.

That said, the outlook is positive. Moderate capital growth, steady yields, and improved cash flow from cheaper finance all point to renewed opportunity. It’s a great time to revisit your portfolio strategy, explore emerging suburbs using Homely’s data tools, and stay connected to the market with timely alerts and suburb insights.

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Final thought

After a long stretch of rate hikes, this second consecutive cut from the RBA suggests a turning point. While it won’t transform the property market overnight, it does offer some breathing space for buyers, modest relief for renters, and renewed momentum for sellers and investors.

For those navigating the market, Homely can help in the search for your perfect home with suburb reviews and property alerts to expert insights tailored to your journey. Whether you’re searching, selling, or looking for your next rental, Homely is here to help.