The interest rate cut will support housing markets, but don’t expect a boom in housing prices until affordability improves.

With the average variable rate for owner-occupier loans expected to fall to around 5.81%, reducing repayments on a $750,000 loan by $81/month, the rate cut is expected to lift consumer confidence, says CoreLogic executive research director Tim Lawless. “This combination of lower interest rates and improved sentiment is likely to support increased activity in the housing sector, given that there is generally a correlation between consumer sentiment and home sales volumes,” he says. “That said, we don’t expect a significant acceleration in capital gains. Several factors continue to constrain price growth, including stretched affordability, cautious lending practices, and the reality that interest rates remain in restrictive territory.”

Analytics by Equifax shows that pre-approval levels through mortgage brokers increased by 24% in March compared with the same time last year. Kevin James of Equifax says the rate cut earlier this year would have encouraged many aspiring homeowners to get ready to buy.