The Real Estate Institute of Australia (REIA) says the Reserve Bank of Australia’s (RBA) decision to keep the official cash rate steady at 3.85 per cent, despite widespread market expectation of a change, leaves borrowing costs high just as first home buyers continue to struggle with affordability and housing market activity softens.
REIA President, Ms Leanne Pilkington, said that while holding the rate steady provides some predictability, the latest data indicates first-time buyers are still struggling to enter the market.
“Keeping rates steady offers some stability, but it doesn’t yet ease the financial strain facing many Australians,” Ms Pilkington said. “We’re seeing reduced activity among first home buyers, which signals broader affordability issues that remain unresolved.”
Ms Pilkington also noted that in May, the RBA Governor indicated a willingness to lower interest rates again if inflationary pressures remain contained.
“We understand the RBA’s priority is returning inflation to its target band, but this needs to be balanced against the risk of further dampening housing demand and locking first home buyers out of the market,” Ms Pilkington said. “A modest rate cut could help ease mortgage stress without undermining the broader inflation goals.”
“Whilst rental pressures are easing, borrowing costs will need to drop further to provide genuine relief to households,” she said.
Recent data from the Australian Bureau of Statistics (ABS) shows the number of new owner-occupier first home buyer loan commitments fell 4.2 per cent in the March quarter of 2025, with the total value of those loans dropping 3.2 per cent.
“This fall in lending points to the difficulty first-time buyers are facing, especially as cost-of-living pressures persist and wages remain flat,” Ms Pilkington said. “Even with the RBA holding steady, borrowing costs are still historically high for many new entrants to the market.”
Ms Pilkington stressed that while interest rate stability is welcome, real progress on housing affordability depends on broader action.
“Supply constraints, slow planning systems, and inadequate incentives continue to lock buyers out. We urge all levels of government to push forward with reform that increases housing availability and supports affordability, particularly for younger Australians and renters.”
“If first home buyer activity continues to weaken, a rate cut at the RBA’s next meeting would provide much-needed relief for households and help restore confidence in the housing market.”
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