The big news for property investors this week was the cut in interest rates by 0.25 of a percentage point, the first interest rate cut in more than 4 years.
With that said, the RBA governor Michele Bullock has clearly set expectations that further interest rate cuts may not be happening any time soon, as discussed in the following article published by the ABC - https://www.abc.net.au/news/2025-02-19/reserve-bank-cuts-rates-but-will-it-be-the-last/104949396.
The RBA governor has stated that the market is anticipating further interest rate cuts in the middle of next year (2026), which she says is being far too confident - this not only sets the expectation that interest rates are unlikely to go down further this year, but also potentially not even in 2026.
So what does the 0.25% interest rate cut mean for property investors?
If the banks follow suit, here is an example to demonstrate the impact for an investor with a portfolio of 5 investment properties.
Lets assume he had a variable interest rate of 6.5% across all 5 of his IP loans prior to the rate cut.
A 0.25% reduction means that the interest rate has reduced to 6.25%. If the investor has an average loan $550,000 per investment property, that is total borrowings of $2,750,000.
Assuming the investor has Interest Only (IO) loans for all of his IPs, the total amount of interest he was paying per year before the rate cut was 0.065 * $2,750,000 = $178,750. If we divide $178,750 by 12, we get monthly interest repayments $14,895.
After the interest rate cut, the total amount of annual interest he will pay is 0.0625 * $2,750,000 = $171,875. If we divide this by 12, we get monthly interest repayments of $14,323.
This is a saving of $572 per month for the investor. The saving for investors with larger portfolios will be even higher, showing that a basis point reduction of 0.25% has a bigger impact that you may initially have thought.