Melbourne auction market braces for major shift after rate cut

Melbourne’s auction market is set for a lift as soon as this weekend after the RBA cut Australia’s official cash rate by 0.25 percentage points on Tuesday. Picture: Mark Stewart.

An interest-rate cut earlier this week has been tipped to start giving Melbourne’s auction market a lift as soon as this weekend.

But property experts believe it will be a looming change to Australia’s First Home Guarantee that will have first-home buyers in particular looking to make a move as soon as possible.

Tuesday’s 0.25 percentage point rate cut by the Reserve Bank added about $20,000 to the borrowing capacity of a typical homebuyer, while also boosting confidence with the prospect of smaller mortgage costs once they settle their purchase.

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It’s good news of the owners of the 887 Victorian homes set to go under the hammer this week, according to PropTrack, following a 68 per cent clearance rate last week.

PropTrack senior economist Eleanor Creagh said the latest rate cut was likely to give some buyers a modest confidence boost.

“That being said, the impact of rate cuts on auction activity tends to build gradually rather than at once, as buyers factor the change into their finances and bidding strategies,” Ms Creagh said.

PropTrack senior economist Eleanor Creagh says last week’s rate cut could be a confidence boost for some buyers, thanks to improved borrowing capacity and slightly lower mortgage repayments.

Featuring new wraparound Jarah decking suspended on a steel frame, this three-bedroom house at 39 Lawanna Drive, Templestowe, will go under the hammer with a $1.05m-$1.15m asking range on Saturday.

However, Real Estate Institute of Victoria director and Compton Green Inner West director Adrian Butera said Melbourne homebuyers had been very active this winter, which he attributed to buyers already taking interest rate cuts into account.

“We are seeing more buyers come through real estate, maybe 15 to 20 per cent more – that’s an estimate – but that is also maybe down to a lack of stock,” Mr Butera said.

However, Real Estate Institute of Victoria director and Compton Green Inner West director Adrian Butera says buyers have been more active at auctions this winter.

A three-bedroom unit, 1/36 Collins St, Mentone, has been inspected by more than 60 buyer groups. It will be auctioned on Saturday with $880,000-$940,000 price hopes.

Melbourne-based buyer’s advocate Emily Wallace said in addition to rate cuts boosting buyer confidence, many young purchasers were now hoping to secure a home before Christmas.

From January 1, the federal government’s Home Guarantee Scheme will become open to all Australian first-home buyers with a 5 per cent deposit, regardless of their income.

Under the scheme, which is currently means-tested and accepts a limited number of buyers, the federal government guarantees up to 15 per cent of a home loan’s value.

Buyers’ agent Emily Wallace has spoken to many Melbourne buyers keen to purchase a residence before changes to the federal government’s Home Guarantee Scheme are applied in January, 2026.

More than 80 groups have looked through this renovated two-bedroom villa at 1/79 Fyffe St, Thornbury, that’s for sale with a $840,000-$880,000 price tag and will be auctioned on Saturday.

From next year the program’s price cap for people wanting to buy in Melbourne and some of regional Victoria is set to rise from $800,000 to $950,000 per home, as well as removing income thresholds.

Ms Wallace said many buyers felt with this change on top of interest rate cuts, homes priced below $950,000 would “be even more competitive” from next year.

“So I think there’s a sentiment of, ‘Let’s get in now,” she said.

“I think, anything that lowers barriers for other buyers to come into the market, you’d want to get in before that.”

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