October 2025
Dear Client
RBA HOLDS CASH RATE AT 3.60%: WHAT IT MEANS FOR BORROWERS AND FIRST HOME BUYERS
In a move that surprised few, the Reserve Bank of Australia (RBA) has kept the cash rate on hold at 3.60% during its sixth monetary policy meeting of the year.
The decision comes after a closely watched run of inflation data and months of speculation from economists and major banks, most of whom had already circled November as the earliest realistic window for a rate cut.
A key factor in the RBA’s decision was the August CPI data, which showed inflation rising to 3.0%, up from 2.8% in July. While this figure still falls within the RBA’s official target range of 2–3%, it’s at the very top end—enough to delay any immediate loosening of monetary policy.
Interestingly, every rate cut this year has been followed by a hold, and this latest decision continues that trend. The most recent cut in August (by 25 basis points) set the stage for a cautious approach in October.
For existing borrowers and first-time buyers alike, the message is clear: don’t sit idle waiting for a cut.
Markets imply around a 45% chance the RBA will cut rates by a quarter point in November, with around a 70% probability of an easing in December instead.
While the RBA is taking a wait-and-see approach, borrowers and buyers shouldn’t. Whether you’re already in the market or looking to enter, now’s the time to plan ahead, assess your options, and take advantage of available support.
HOME GUARANTEE SCHEME (HGS) IN AUSTRALIA IS NOW LIVE
The HGS is a federal initiative run by Housing Australia that allows eligible home-buyers to purchase a property with a deposit as low as 5% of the property value, by way of the government guaranteeing the remainder so that lenders can more easily approve the loan without Lenders’ Mortgage Insurance (LMI).
From 1 October 2025, key expansions took effect:
- the number of places becomes effectively unlimited (i.e. no cap on participants)
- the income caps for applicants (and their partners) were removed.
- the property price caps (i.e., the maximum purchase price eligible under the scheme) were increased across many states.
- SA (capital city) $900,000
- SA (other) $500,000
The scheme makes clear: this is not the government giving you the deposit; you still bring your 5% (or the required minimum), you still pay all the fees, legal costs, stamp duty etc. The guarantee is to the lender rather than a cash subsidy to the buyer.
The scheme will, in our opinion, increase demand and create upward pressure on prices. It’s logical that if more buyers can purchase with smaller deposits, demand in the eligible segments may increase. If supply remains constrained, this tends to push up prices.
For example: one modelling exercise (by Insurance Council of Australia/Lateral Economics) estimated the expansion could lift national home prices 3.5%–6.6% in the first year, and up to 5.3%–9.9% in the segments targeted by first home buyer.
The scheme may help some buyers get in, but because of price rises and possibly larger loan burdens (due to smaller deposits), some new buyers might end up in weaker financial positions. Unless housing supply increases (new builds, renovations, land release) the policy effectively just stimulates demand without solving the root challenge.
We are forecasting some extra demand in the entry price segments which could push up prices. So, if you are thinking about getting a family member into real estate or looking to buy an investment, the introduction of this scheme should motivate you to act sooner rather than later.
ANTI-MONEY-LAUNDERING / COUNTER-TERRORISM FINANCING (AML/CTF)
From 1 July 2026 the AML/CTF net in Australia widens to include many professionals involved in property transactions. As a buyer or seller as of 1 July 2026 an agent, conveyancer or lawyer will need to comply with obligations under the expanded anti-money-laundering/counter-terrorism financing (AML/CTF) regime and, as a buyer or seller, you need to be prepared for more identification requirements, verification and transparency around the funds involved.
What will we need to do? Build systems around Customer Due Diligence (CDD) & Know-Your-Customer (KYC). So before providing certain designated services, we must verify the identity of clients (buyers/sellers/transferees) and assess their risk (e.g., whether they may be higher risk for ML/TF) plus ongoing monitoring of the relationship and transactions. If we detect a transaction or series of transactions that give rise to a suspicion of money-laundering or terrorism-financing, we must file a suspicious matter report with AUSTRAC.
Thank you for your ongoing support!
Regards David, Benjamin & the Team at DB Philpott Real Estate
