Big 4 Banks Predict Huge RBA Rate Cuts - Property Prices Set to Surge!

Big 4 Banks Predict Huge RBA Rate Cuts - Property Prices Set to Surge!

Are you ready for some game-changing news if you're holding property debt or planning to enter the market? Australia's Big 4 banks are now predicting major RBA cash rate cuts, with the first move expected as early as May 2025,  and a potential 0.5% drop straight away!

In this episode, we break down detailed analysis of ASX rate predictors and future yield curves to reveal why now could be the perfect time to invest. With NAB forecasting the cash rate to fall from 4.1% to 2.85% by November 2025, property investors could benefit from major savings and a sharp boost in borrowing power.

A 1% rate cut on $1 million of debt = roughly $10,000 annual savings + a 15% increase in borrowing capacity, meaning property prices are poised to surge again.

The window of opportunity is now. Will you act before the competition floods back in... or be left regretting waiting too long?

Tune in to discover why smart investors are already positioning themselves ahead of the curve.

tags:

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property prices Australia

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interest rate cuts

borrowing power property

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Chapters

• 0:00 Introducing Rate Cut Predictions
• 1:30 ASX Rate Predictor Analysis
• 4:20 Big Four Banks' Rate Forecasts
• 5:49 Cash Flow Impact of Rate Reductions
• 7:30 Why Property Prices Will Continue Rising
• 10:00 Act Now Before the Market Rush

Transcript

Speaker 1: 0:00

Welcome back to another episode of the Taylor Property Wealth Podcast. My name is Casey Taylor, I'm the host of the podcast and in today's episode we are talking about the big four predicting that the RBA are going to slash the cash rate and what this means for property prices, and it means that property prices are going to continue to perform. So we're going to, I guess, break down those, those predictions what it's going to mean from a cash flow perspective for when you're holding debt, and also what it's going to mean to property prices. So let's get into it. And firstly, we're just going to go over the ASX rate predictor. Now. This one fluctuates month to month. However, throughout the month of April it's actually changed from predicting a 0.25% rate cut to now predicting half a percent being 0.5%. So I guess it's pretty positive to look at that. We're now predicting half a percent and, as we look at it, as of today and the 25th being the last release of that data, it's a 62% chance that we're going to see that 0.5% rate reduction from 4.1% through to 3.6%. Now, 62% of a half percent rate cut pretty much solidifies that we're going to see at least a 0.25 percent rate cut. Hopefully it's half a percent, who knows? But based on the ASX it's 62 percent. As of the 25th of April that we're going to see half a percent rate reduction.

Speaker 1: 1:38

Now I guess, coinciding with that, if we look at the ASX 30-day cash rate compared to the future implied yield curve, there is some pretty exciting data to look at there. So essentially we want to compare the difference between the current cash rate and the implied yield over time and based on that, as of January next year, we're expecting to see rates a lot lower than they are. So currently, in April we've got the cash rate obviously at 4.1% and the implied yield is 4.085%. So essentially they're pretty much the same. But over time there is a big difference between the current cash rate and where they predict it. So for the month of May the implied yield is 3.98%. For the month of June it is 3.785% implied yield, july 3.63% and then we have August 3.415. So over the next coming months there is a difference between the current cash rate and the implied yield suggesting we're going to see those rate reductions. And if we fast forward all the way through to December 2025, the implied yield is 2.95% and then January 2026 is 2.935, essentially the same. However, it is suggesting that we're going to get over a 1% rate cut by January next year, so essentially roughly around eight months. Now that means some pretty significant, I guess, changes with your repayments, with your interest rates, if that is to take effect.

Speaker 1: 3:28

Now the big four are all predicting a rate reduction of 0.5% for the month of May, from that 4.1 to 3.6%. Nab has some pretty bold predictions as well that have been updated. We know from the past that banks don't always get this correct. However, there has been a big shift and change in those predictions recently. We've obviously experienced that 1.025% rate reduction already and the banks pretty much passed that on straightaway, right, the big four? They moved, passed it on and then everyone followed pretty quickly and I think there's no guarantee that they're always going to pass on that full rate reduction that the, the rba do change. However, I think there's just going to be a lot of pressure on them that they have to make these reductions to really really help what's going on with the current environment. All right, so NAB predictions If we go to NAB's predictions for a rate cut, they're predicting 0.5% for the month of May, down to a cash rate of 3.6%.

Speaker 1: 4:36

July they're expecting another 0.25%, bringing the cash rate to 3.35, and August another one 0.25, bringing the cash rate to 3.1%. So then it would be a hold for September and then another rate reduction in November 2025, bringing the cash rate to 2.85%. So it's a pretty big swing in terms of what takes place and that would be a 1.5% rate reduction from our peak back in February through to November. If that does take place and we'll go over, I guess, what that means for some of those repayments, because it is quite substantial. Now, just with NAB, I want to point out they're predicting another rate reduction of 0.25% in February 2026 would bring the cash rate to 2.6%. So positive news if you are a borrower, or positive news if you're looking to borrow in the near future, and we'll definitely discuss some of the impacts it's going to have on those property prices Based on some of those rate reductions.

Speaker 1: 5:49

What is that going to mean for cash flow? If we have just a 1% basis point reduction on $1 million of debt, that is approximately a saving of $10,000 per annum on repayments, which is substantial. That's essentially $200 per week, $800 roughly. It's obviously going to be a little bit more than that on a monthly basis, but some really significant changes. So if you're out there holding debt currently, your cash flow is going to dramatically improve on what you're holding or moving forward with your purchases. You can factor that in and your cash flow is going to improve. Now, if you're someone out there holding a couple of million dollars worth of debt, it's going to be very powerful on what your cash flow looks like. And then, if you look at it from a borrowing capacity perspective, that's roughly around a 15% increase on your borrowing capacity with that 1% basis reduction. So it is extremely powerful.

Speaker 1: 6:56

Now, if everyone can go out there and borrow 15% more, property prices always come back to what people can borrow. People can borrow more. They can afford to push prices higher and that's why we always want to compare average prices, medium value of an area compared to the income, because we know that, based on borrowing capacity, it can push prices higher. It's an important metric to look at. That's why some marketplaces, for example Sydney, once they reach their borrowing capacity limit, they can't push much higher, but then, once they drop a little bit, then people can borrow more and then we can see that price growth. Now some of these areas at the moment that have underperformed, that have affordability. There is going to be a really big heat up in those marketplaces, with just continued pressure, or some of those marketplaces are going to shift and change and they're going to really start to ramp up. So that is something extremely important Now.

Speaker 1: 7:58

Right now, a lot of people aren't going to take action until they see those rate reductions take place. Going to take action until they see those rate reductions take place. So in six months time, there's going to be a lot more people borrowing and a lot more people you're going to be competing with in six months than there is today. And that is why we are always trying to get in as soon as possible, because we know marketplaces are going to change and if you can get in and compete with less people, it means you can get that stronger deal, better conditions for yourself, and then, six months' time, you're laughing when everyone's starting to jump in, okay. So it is very important to understand this when you're going out there and borrowing funds.

Speaker 1: 8:43

And we believe that property prices are going to continue to perform really strongly over the next couple of years, especially once this starts to kick in and there's a lot of things going on globally, right. However, if we fundamentally understand the supply and demand issue which I bang on about all the time. Property prices will continue to grow because there is so much pressure and there is not the supply levels keeping up with demand. You can go back to our previous episode where we go into this. The federal government simply are not making enough supply and enough houses that they've set out over the next five years and that is going to be a core metric to look at and understand the pressure and why property prices will continue to increase. If you're sitting on your hands right now because you think property prices are going to drop 10, 15% because of this noise with Trump and all the rest of it, you are going to be paying more for the exact same asset in six to 12 months than you are today. You can't time cycles. There is no perfect time to purchase, but with these rate cuts coming, this will affect borrowing power positively, which is going to put pressure on price growth.

Speaker 1: 10:00

It's kind of like a similar situation to at the start of COVID. We had all these people freaking out. That's when I got in and purchased, while people were literally at the supermarket fighting over toilet paper. However, in six months, the whole thing had just gone, gangbusters and it really started to perform and we had that nationwide boom. So understand that now is a very similar time to that of five years ago, in March 2020. People are fighting over toilet paper and that really shifted and changed over toilet paper and that really shifted and changed. So if you can understand this and compare it to five years ago, you are going to do extremely well. Those who have been purchasing over the last couple of years and got that performance, and now there's just going to be a big change and shift and people are going to jump back in and that's going to be positive for you.

Speaker 1: 10:54

I hope you've enjoyed this episode. It's really important to understand the factors on what these rate reductions are going to do for property prices and going out there investing. If you're deciding whether to purchase now, you want to get in before the herd flood back to the marketplace, it will happen. You will be competing with more people and you can look back at this time and go, fuck, I should have. I should have taken action six months ago. So take the information and do with it what you will. However, there's rate reductions just around the corner and that's going to be positive for anyone holding debt and if you're wanting to purchase, moving forward, that cash flow is going to improve significantly. Thanks for listening. I hope you enjoyed this one and we will see you on the next. If you're wanting to purchase, moving forward, that cash flow is going to improve significantly. Thanks for listening, I hope you enjoyed this one and we will see you on the next episode. Bye.