Struggling mortgage-holders will have more money in their pockets thanks to the Reserve Bank of Australia’s (RBA) decision last week to cut the cash rate by 25 basis points.
But a local academic has predicted future cuts could lead to a more competitive and gentrified housing market in Logan, ultimately pushing young people out of the city.
This is the second interest rate cut this year and the first time since 2023 that the cash rate has been below 4% – now at 3.85%.
Professor at Griffith University’s School of Government and International Relations, Dr Ferran Martinez i Coma, said this could mean an increase in the price of housing.
“Since the interest rate has declined, it is likely that housing prices will go up,” he said.
Modelling based on historic housing market data shows that when mortgage loan interest rates decrease, housing market prices increase.
“The home prices will usually tend to increase a little bit,” Dr Coma said.
Two or three consecutive rate cuts would imply that there will be an increase in housing prices by as much as 10% or 15% over the next 12-18 months.
“That’s a lot of money,” Dr Coma said.
“That would affect housing accessibility, especially for younger people.”
For Logan, it is likely that the number of people looking to buy in the area will increase as aspiring homebuyers are priced out of inner city Brisbane suburbs.
“Logan will become a more interesting market for people who want to try and get into the market,” Dr Coma said.
A similar trend has already occurred in Ipswich.
“Look at what has happened in Ipswich…it has gentrified massively in the last 10 years.”
The cut will impact current homeowners differently. For those who own their home without a mortgage, there will be minimal or no change at all.
For homeowners making monthly mortgage repayments, which vary depending on the value of a property and the home loan, the interest rate cut will put more money into their pockets.
Dr Coma said saving $85 or $100 every month will make a difference to families struggling to put food on the table.
“It may not look or seem like a lot of money or some people,” Dr Coma said.
“But saving $85 or $100 every month will make a difference to families struggling to put food on the table.”
A third interest rate cut is likely to occur in the next 12 months, Dr Coma said. Although predicting an exact time frame is difficult.
“The RBA declaration, or at least what they have been telling people, is that everything is on the table.
“I think it will happen this year. However, given the uncertainty in the global markets, they don’t want to say yes for sure.”
