The Reserve Bank of Australia (RBA)’s interest rate cuts present opportunity and concerns for first-home buyers hoping to get onto the property ladder. Lower rates will allow buyers to borrow and spend more, but they are also set to increase competition and push up already high property prices.

Jacqui Knight and her husband Tim purchased their first home in October last year, a four-bedroom townhouse in Sydney’s Bangor for $1.385 million. The 38-year-old business owner told Yahoo Finance the couple had to make “serious revisions” on where and what they were looking for to buy a home when they did.

The couple had originally planned to buy in Jannali, about 30 kilometres south of the CBD, but found prices were rising by more than $20,000 a month. Knight said their savings just couldn't keep up.

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“$20,000 a month for the last 12 months of property increases is quite insane,” she said.

“When you’re a first-home buyer, you can’t save that amount of money. You can’t keep up with that.”

The couple instead bought in nearby Bangor, which is close to the school their two young kids attend, along with being nearby to relatives.

Knight said the couple were keen to buy ahead of the RBA cutting interest rates and the tougher competition it is expected to bring.

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“We were hoping that they weren’t going to drop almost because we had just a limited budget to buy,” Knight said.

“It’s not a huge change but any change in that regard just really has a massive impact on the number of people buying and the number of properties on the market.”

Knight said the couple first started the process of looking for a home in December 2023 with a broker and later enlisted the help of a buyer’s agent.

They saved up a $140,000 deposit and had a family member go guarantor on their mortgage so they could make up a 20 per cent deposit for the property.

RBA rate cuts expected to push up property prices

Research by CoreLogic found property prices could increase by an average of 6.1 per cent for each one per cent drop in the cash rate, based on previous periods of rate reductions.

Commonwealth Bank and Westpac are expecting four 0.25 per cent cuts this rate-cutting cycle, while NAB has forecast five and ANZ two.

CoreLogic said certain markets would see a bigger boost in values from rate reductions than others, with premium Sydney and Melbourne suburbs likely to enjoy the biggest increases.