The Reserve Bank’s Monetary Policy Board is meeting to decide on interest rates. It is widely expected to cut the cash rate to 3.6 per cent, saving a typical mortgage borrower hundreds of dollars a year. While it’s welcome news for millions of borrowers, it’s a double-edged sword for first home buyers with property prices tipped to pick up further as a result. Economists say lower inflation and a sluggish economy support the case for the RBA to lower the cash rate. Cotality head of research Australia, Eliza Owen says since rates started to decline, home values in Sydney, Melbourne, Brisbane and Perth have risen by more than 2 per cent. Property prices, she said, could go higher as interest rates fall. She says a reduction in interest rates is like a price cut on the cost of debt, as it increases the maximum people can borrow for mortgages, which usually pushes property values higher.
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