When Will Interest Rates Go Down in Australia? The Silver Lining of a Cooling Property Market

Not long ago, every second conversation at a Perth barbecue was about how much a neighbour's house had gained. That talk has gone quiet. Property values are softening, auction clearance rates have come off the boil, and plenty of homeowners are watching their biggest asset drift backwards for the first time in years.

It feels like bad news. But the question almost every mortgage holder is really asking is what the future holds for interest rates, and softening property values are one of the few forces quietly working in your favour on that front. 

Quick Answer

The big four banks now agree the next move in the cash rate is down, but none expect it before 2027. Commonwealth Bank is forecasting a first cut around May 2027, NAB around June, Westpac around August and ANZ around September, with the cash rate currently sitting at 4.35%. So the honest answer to when will interest rates go down in Australia is: not soon, and probably not this year.

That does not mean you are stuck paying today's rate until then. At Osinski Finance, a family owned broking business that has worked with Rockingham and greater Perth homeowners since 2017, most of the rate relief we secure has nothing to do with the RBA. It comes from moving an existing loan onto a sharper rate the borrower already qualified for. That is a cut you control, and it can land in weeks rather than years.

Falling House Prices in Australia & What They Actually Signal

Falling property values are not the beginning of a collapse, and it is worth saying that plainly before going any further. What the data shows is a cooling, not a crash. National home prices are now 1.8% lower than they were in March, with Sydney and Melbourne leading the softening.

It is entirely reasonable to feel uneasy about that. Watching a home slip a few percentage points after years of gains is unsettling, even when nothing about your day to day situation has changed.

But there is a mechanism sitting underneath those numbers that works in a homeowner's favour. Cooling property values feed into the inflation picture, and a softer inflation picture is exactly what the Reserve Bank needs to see before it stops thinking about hikes and starts thinking about cuts.

Why the Reserve Bank Is Watching Housing So Closely

The RBA has never been coy about its target: it wants inflation sitting between 2 and 3%. We are still some distance from that, with inflation currently at 3.8%.

Here is the part that connects the two stories. Housing is one of the largest single factors contributing to the Consumer Price Index, the measure that defines inflation in Australia. The CPI housing component does not track the resale value of existing homes directly, but those sale prices produce a very real flow-on effect through two channels.

• The wealth effect. When homeowners feel their property is worth less, they feel less financially secure and they tighten their belts. Discretionary spending drops. The reverse happens when prices are running hot and everyone feels wealthier than they did last year.
• The transaction effect. A busy property market is a spending engine in its own right. Every sale tends to drag along new appliances, furniture, floor coverings, renovations, extensions and tradespeople. Fewer sales means less of all of it.

So a fall in property prices helps take heat out of inflation, which reduces the odds of another rate rise. The relationship between house prices and interest rates runs in both directions, and right now it is running in the direction mortgage holders want.

This is not a theory we have invented. RBA assistant governor Christopher Kent recently said softening property market conditions "heavily reduced" the need for further rate rises.

When Will Home Loan Rates Actually Come Down?

Nobody has a crystal ball, and any broker who tells you they know the month is guessing. What we can do is read the signals honestly.

In early August, RBA governor Michele Bullock cautioned that future rate hikes can't be ruled out if inflation looks like remaining higher for longer. That hawkish half of the picture deserves to be taken seriously. On the other side, most of the big banks now expect the next rate move to be down. The direction of travel has genuinely shifted.

The catch is timing. The RBA doesn't expect inflation to reach its preferred 2-3% target before mid-2027, and no bank forecast puts a cut ahead of it. For a household already stretched by higher repayments, that is a long wait, and it is the single biggest driver of mortgage stress we see walking through our door in Perth.

Any RBA interest rate forecast is a working assumption rather than a promise. We keep our interest rate tracker updated so clients can see where things stand without decoding a bank economist's commentary.

You Might Not Have to Wait at All

You do not need the Reserve Bank's permission to lower your interest rate. 

The Case for a Home Loan Review Right Now

Competition between lenders has become genuinely fierce, with almost 50 lenders currently offering variable rates below 6%, according to Canstar. Compare that to what a typical loyal borrower pays. An owner occupier who took out a home loan five years ago and never renegotiated is likely sitting closer to 6.97%.

That gap is the whole argument. It is roughly a full percentage point, available today, with no RBA meeting required. On a $600,000 balance that is not a rounding error; it is real money returning to your budget every month.

If that sounds like your situation, it is probably time for a home loan review. Use the average home loan interest rate in Australia as your benchmark: if your rate sits meaningfully above it, you are funding someone else's discount.

What a Falling Market Means for Refinancing

Here is the question a cooling market creates and almost nobody answers: if my property is worth less than it was, can I still refinance? Usually, yes. But the detail matters.

• Your loan-to-value ratio may have moved. Lenders assess your loan against a current property valuation, not your purchase price. If values in your suburb have softened, your LVR may be higher than you assumed.
• The 80% threshold is the one to watch. Sitting under 80% LVR generally unlocks the sharpest advertised rates and avoids lenders mortgage insurance. Years of principal repayments and earlier price growth mean most established borrowers still clear it comfortably.
• Valuations vary between lenders. Different lenders use different valuation methods and different panels, so one lender's number is not the market's final word. That is exactly why access to a wide lender panel matters.
• Costs need to be weighed. Discharge fees, application fees and break costs on a fixed loan all count against the saving before a switch makes sense.
  

Before you go anywhere near an application, it is worth knowing roughly where your property sits. Our free property report gives you that picture at no cost and no obligation.

Should You Fix Your Rate Instead?

If the next move is down but the timing is uncertain, locking in becomes a real question rather than an academic one. Fixing buys repayment certainty and protects you if inflation proves stubborn and the RBA hikes again. It also means you miss out if cuts arrive earlier than forecast, and fixed loans typically come with less flexibility around extra repayments and offset accounts.

There is no universally correct answer. It depends on how much certainty you need to sleep at night, how long you plan to hold the property, and whether you expect to sell or renovate inside the fixed term. A split between fixed and variable suits plenty of the households we work with, and it is worth understanding fixed rate home loan options properly before committing either way.

Talk to Osinski Finance About Your Options

Osinski Finance is a family owned and operated mortgage broking business based in Rockingham, helping homeowners, first home buyers and investors across Perth and Western Australia. With around 25 years of combined banking and finance experience and accreditation with close to 100 lenders, our brokers can help you find the right home loan, explore your options for investing in a property, or refinance a home loan. We work for you, not the banks.

Message us today for a quick home loan health check, and we’ll give you an honest look at your options without the pressure. 

Key Takeaways

• The big four banks now expect the next cash rate move to be down, but none forecast a cut before 2027, with the cash rate currently at 4.35%.
• National home prices sit 1.8% below their March level, led by softening in Sydney and Melbourne. This is a cooling market, not a collapse.
• Housing is one of the largest components of the Consumer Price Index, so softer property values help ease inflation and reduce the pressure for further rate rises.
• RBA assistant governor Christopher Kent has said softening property conditions "heavily reduced" the need for more hikes, while governor Michele Bullock has warned hikes cannot be ruled out entirely.
• Almost 50 lenders currently offer variable rates below 6%, while a borrower who has not renegotiated in five years is likely paying around 6.97%.
• Refinancing is usually still available in a softer market, but your loan-to-value ratio and a current property valuation will shape which rates you can access.

Frequently Asked Questions

When will interest rates go down in Australia?

The big four banks expect the first cut some time in 2027. Forecasts range from around May through to September, depending on which bank you ask. The cash rate is currently 4.35%, and the RBA does not expect inflation back inside its 2 to 3% target band before mid-2027. No forecast is a guarantee. The RBA has been clear that another hike remains possible if inflation proves sticky. Waiting for the RBA is a long strategy. Refinancing is a short one. 

Are house prices falling in Australia right now?

Yes, modestly. National home prices are around 1.8% lower than they were in March. The softening is concentrated in Sydney and Melbourne. This is a market that had run very hard, now cooling, not a crash, and a persistent national housing shortage continues to underpin baseline demand. Individual suburbs and property types are moving at very different speeds. A national figure tells you about the trend, not about your street. 

How do falling house prices affect interest rates?

Housing is one of the largest contributors to the Consumer Price Index, the measure that defines Australian inflation. When property values soften, homeowners feel less secure and spend less. Fewer property transactions also mean less spending on renovations, furniture, appliances and trades. Both effects take heat out of inflation. Lower inflation reduces the pressure on the RBA to raise rates further. That is why a cooling market can be quietly good news for anyone carrying a mortgage. 

Can I still refinance if my property has dropped in value?

In most cases, yes. Lenders assess refinancing against a current valuation, not your original purchase price. A softer market can therefore lift your loan-to-value ratio slightly. Most established borrowers still sit comfortably under the 80% LVR threshold that unlocks the sharpest rates, particularly after several years of paying down principal. Valuations also differ between lenders. A disappointing number from one lender does not close the door on the others. 

What rate should I be paying on my home loan?

Almost 50 lenders are currently offering variable rates below 6%. That is a fair benchmark for a competitive owner occupier rate. A borrower who took out a loan five years ago and never renegotiated is likely paying around 6.97%. If your rate starts with a 6 and you have not reviewed it in a few years, there is a strong chance you are paying a loyalty premium. The only way to know for certain is to have your loan, balance and equity position assessed. 

Should I fix my home loan or stay variable?

If forecasts are correct and the next move is down, staying variable means you benefit as soon as cuts arrive. Fixing gives you repayment certainty instead. It also protects you if inflation stays high and the RBA hikes again. The trade off is flexibility: fixed loans usually limit extra repayments and offset accounts, and they carry break costs if you exit early. Many households land on a split between the two. That hedges the timing question rather than betting on it. 

How much can I actually save by refinancing?

It depends on your current rate, your loan balance, your remaining term and your equity position. The only reliable figure is one modelled on your actual loan. You also need to weigh the costs, including discharge fees, application fees and any fixed rate break costs. On a typical established loan, the gap between loyal and new borrower pricing is wide enough that the saving usually clears those costs comfortably. A broker can run the numbers before you commit. 

Is now a good time to buy a property in Australia?

A cooling market usually means less competition at auction, more room to negotiate and less pressure to rush. Those are genuine advantages for a buyer. The trade off is that borrowing capacity is still constrained by higher rates, so you may be able to borrow less than you would have a few years ago. What matters far more than any national forecast is your income stability, your deposit and how long you intend to hold the property. Getting your borrowing capacity assessed first turns an abstract question into a concrete one. 

How often should I review my home loan?

Every one to two years is a sensible rhythm, and sooner if your circumstances change. A pay rise, a new job, paying off a car loan, finishing a fixed term or a shift in the rate market can all change what you qualify for. Lenders reserve their sharpest pricing for new business. The longer you stay put without asking, the wider the gap between your rate and the market tends to become. 

Do I need to pay a mortgage broker to review my loan?

Not at Osinski Finance. We charge no fees for home loan assistance. If we secure a better loan for you, the lender pays us a commission. If we cannot improve on what you already have, we will tell you straight, and it costs you nothing. 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.