RBA Poised to Cut Rates as CBA Forecasts Modest Rise in Home Prices

The Reserve Bank of Australia is meeting this week, and markets are bracing for a potential interest rate cut. After surprising analysts last month by holding rates steady, the RBA is now expected to lower the cash rate by 25 basis points. This move could have immediate implications for the housing market, which tends to respond quickly to shifts in borrowing costs.

Economists at the Commonwealth Bank, including chief economist Luke Yeaman and associate economist Lucinda Jerogin, have updated their housing forecasts in anticipation of the rate cut. They now expect home prices to rise more sharply by the end of this year than previously predicted, though growth is likely to slow in 2025. Their projections are based on the assumption that the RBA will cut rates again in November, with a possible third cut in early 2026.

If rates continue to fall, property prices could climb even higher than forecast. However, the economists caution that this won’t solve Australia’s deep-rooted affordability issues. Despite the expected price gains, they argue that housing remains out of reach for many Australians, and the structural problems in supply and affordability persist.

“There is little cause for celebration,” they conclude, pointing to the need for broader reforms beyond monetary policy. While lower rates may offer short-term relief for borrowers and boost market activity, they won’t fix the underlying challenges facing the housing sector.