The firm favourite comes in as RBA holds cash rate steady on Melbourne Cup Day

The RBA has opted for the safe bet on Melbourne Cup Day, leaving interest rates on hold.

Borrowers, who have not dealt with a rate rise for two years, are now looking to the final rates announcement of the year on 9 December for one last chance at a 2025 mortgage repayment reprieve.

A 4 November rate cut was at long odds, deemed before the RBA Board decision to be a less than 10 per cent chance.

While borrowers may feel aggrieved at missing out, the decision to leave the official cash rate at 3.60 per cent may help to quell rampaging property prices and offer some relief for prospective buyers.

The three rate cuts already delivered this year have, in conjunction with a lack of new housing supply, sent property prices around the country shooting upwards.

The CEO of Australia’s largest franchise builder said the homebuilder’s 2025 enquiries are well on track to surpass 2024’s figures, as more homebuyers take advantage of low interest rates.

Trent Gardner of GJ Gardner Homes said the surge in property interest was being driven by first home buyers.

“After an onslaught of interest rate increases in 2022 and 2023, we’ve witnessed home buyers across Australia begin to feel some relief and take advantage of the lowered interest rates and commit to building a home.

“In particular, as first home buyers look to time their entrance into the market to take advantage of interest rate cuts, government incentives and lower property prices, the continued trend of lowering or holding interest rates has provided the demographic with confidence to enter the market.”

The RBA’s primary deliberation centred around balancing an unemployment rate that is creeping upwards, with its resultant downward pressure on rates, and worrisome inflation that is putting upwards pressure on the rate call.

Inflation proved the determining factor.

The stronger-than-anticipated September quarter Consumer Price Index (CPI) - with the trimmed mean up 1.0 per cent over the quarter and annual core inflation back at 3.0 per cent – is now at the top of the RBA’s target band.

The statement by the Monetary Policy Board highlighted that the recent data on inflation suggests that some inflationary pressure may remain in the economy.

“With private demand recovering and labour market conditions still appearing a little tight, the Board decided that it was appropriate to maintain the cash rate at its current level at this meeting.

“Financial conditions have eased since the beginning of the year, but it will take some time to see the full effects of earlier cash rate reductions.

“Given this, and the recent evidence of more persistent inflation, the Board judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve.”

Crucially, the Board also hinted that the next interest rate movement might not necessarily be downwards.

“The Board remains alert to the heightened level of uncertainty about the outlook in both directions,” it concluded.

REA Group Senior Economist Eleanor Creagh said the RBA Board was justified in adopting a watchful, cautious stance.

“The (inflation) result was a material surprise, meaning the RBA will need clear evidence that inflation pressures are easing before cutting rates again.

“The Bank remains cautious and data-driven, but mindful that policy is already restrictive and the labour market is gradually cooling.

“Interest rates have moved lower this year, easing pressure on households and lifting (real estate market) confidence throughout spring.

“That has helped extend the national upswing to a tenth straight month, with home prices now 7.5 per cent higher than a year ago, the fastest annual pace since May 2024.

“Increased borrowing power, lower mortgage rates and improving sentiment are fuelling renewed competition.

“Keeping rates steady won’t derail that recovery.

“Earlier cuts and stronger confidence continue to support buyer demand, aided by population growth and the expansion of the Home Guarantee Scheme.

“With new supply constrained, these factors will keep upward pressure on prices, though affordability challenges mean the pace of gains is likely to remain slower than previous cutting cycles and vary across cities,” Ms Creagh said.

Commercial property implications of RBA hold

Commercial property, like its residential counterpart, has also enjoyed a resurgence courtesy of 2025’s softer interest rate environment.

That momentum was unlikely to be stymied by the RBA’s current guarded posturing.

Knight Frank’s Chief Economist, Ben Burston, said commercial property markets retain solid growth momentum heading into 2026.

“Ongoing growth in retail and industrial markets has buoyed investor confidence and is attracting a wider range of investors back to the market, as evidenced by strong transactional activity in Q3 which saw total trading volumes at the highest level since 2022,” he said.

“Living sectors are also in vogue, and investors are eager to position themselves for further rental growth over the medium term by scaling up their exposure.

 “Meanwhile, office markets are starting to recover and Q3 marked the first tightening of yields in the Sydney CBD market since 2021.

“As 2026 progresses, we expect prime rental growth to accelerate in response to dwindling new supply, and this will help the nascent market recovery extend to other cities.

“At the same time, the decision to hold is a reminder that the market cannot rely on multiple further rate cuts to drive growth, and that income growth will need to drive returns over the next cycle.”

Research released Monday (3 November) by JLL showed the office sector was being driven by the same sort of supply shortages endemic to the residential sector.

According to JLL’s data and analysis, 85 per cent of new office projects only commence construction once some level of tenant commitments is secured, highlighting the growing influence of occupiers in shaping Australia’s CBD skylines.

Research Manager Lachlan Apperly said national CBD completions were projected to fall to less than half the 20-year average by 2027-2028.

“Despite elevated headline vacancy rates, JLL research finds that increasingly complex tenant requirements spanning ESG performance, wellness, amenity, and location are tilting demand towards new developments rather than existing stock.”

According to JLL, 85 per cent of new office projects only start once tenants are secured, with pre-committed developments achieving 92 per cent occupancy within two years.

The findings provide confidence to developers and investors considering new projects despite ongoing cost pressures.

“Across multiple cycles, from the global financial crisis to the post-pandemic years, we’ve seen a remarkably consistent trend where most office developments are largely full within two years of completion.

“That resilience gives developers real confidence to move ahead, even in today’s more challenging environment.”