Take advantage of the interest rate cuts to leverage your Northern Beaches equity
The Reserve Bank of Australia has finally delivered a much anticipated 25-basis point rate cut, with the major banks already passing on the full reduction for variable loans. However, you may not realise that many lenders have already slashed their fixed interest rates by around 0.75%. This is a significant drop, marking the start of an expected rate-cutting cycle throughout 2025, which will help drive future growth in booming property markets.
Interest rate cuts – more borrowing power and capital growth
A 0.25% rate cut on a $1 million loan saves $2,500 per year ($50 per week), while a 0.75% cut saves $7,500 per year ($150 per week). But the real advantage? A 0.75% cut can boost borrowing capacity by up to $360,000.
With 10 to 20% capital growth, that’s an extra $36,000 to $72,000 in equity per year on a new property – plus $150,000 to $300,000 on an existing $1.5 million portfolio. Interest rate cuts don’t just improve cash flow – they accelerate wealth creation.
If you own $3 million in property with $2 million in debt, the benefits double – $720,000 in extra borrowing capacity, $72,000 to $144,000 in additional annual equity from new investments, plus $300,000 to $600,000 in capital growth on your existing portfolio. The bigger your portfolio, the greater the impact of rate cuts on your wealth creation.
Use property to invest in booming markets
While Sydney’s property market for houses has experienced just 1.7% growth in the past 12 months, cities like Perth have surged by 17.1%. Rather than reinvesting in a low-growth Sydney market, investors can use the equity in their Northern Beaches and Sydney properties to access high-growth markets nationally. With borrowing power increasing and interest rates dropping, now is the perfect time to strategically invest where the returns are strongest.
Why have banks cut fixed rates now?
Numerous major banks lowered fixed interest rates by around 0.75% in anticipation of further RBA cuts. This signals confidence that inflation is under control and suggests a prolonged period of cheaper borrowing ahead. For investors, this could mean:
- Locking in competitive fixed rates, which would compound over time providing even greater savings.
- Opting for a variable loan structure which allows for further interest rate reductions over time.
- Refinancing your Sydney property which may free up additional funds for strategic reinvestment.
Boost your cash flow and expand your portfolio
Lower interest rates reduce monthly repayments, unlocking cash flow that can be reinvested into high- performing property markets. Even small rate reductions make a significant impact:
- 25 basis points (bp) cut – monthly savings of $71 to $208 (depending on loan size).
- 50bp cut – double the savings, reducing financial pressure.
- 100bp cut – thousands saved annually, making it easier to expand your portfolio.
Growing markets
Some markets are poised for two to four times Sydney’s growth, with 50% to 100% higher net rents over the next three to five years.
The key national markets that are outperforming Sydney include:
- Adelaide: With $400 billion in major infrastructure projects underway – eight times Brisbane’s infrastructure spend, even with the Olympics – Adelaide offers unmatched affordability. The median house price is $900,000, compared to Sydney’s $1.7 million, positioning it for two to four times the growth of Sydney.
- Brisbane: Property prices sit at just 64% of Sydney’s, yet median household incomes are only 12% lower. Record interstate migration is driving significant rental demand, with net rental returns approximately 50% higher than Sydney.
- Perth: While Sydney is expected to experience minimal growth over the next 7 to 10 years due to its plateau cycle, Perth is projected to deliver 60% to 100% more growth over the same period. Additionally, net rental returns in Perth are 50% to 100% higher than in Sydney.
How to maximise this market shift
To make the most of these rate cuts, consider:
- Refinancing your Sydney home – free up equity for strategic investments.
- Targeting high-growth locations – invest where the market fundamentals are strongest.
- Working with an investment property and finance strategist – ensure your investment choices align with long-term financial goals.
- Building financial resilience – use improved cash flow to strengthen your financial buffer and prepare for future opportunities.
Act now to leverage low rates and market growth
This rate-cutting cycle provides a golden opportunity for investors to unlock equity in Sydney properties and deploy it into high-growth markets like Adelaide, Brisbane, and Perth. Whether you’re looking to expand your portfolio, refinance to optimise your investment, restructure your investments, or improve cash-flow with increased safety buffers, now is the time to act. Strategic moves today could be life-changing. Don’t let this golden opportunity pass you by.
Richard Sheppard is the CEO and founder of inSynergy Property Wealth Advisory. inSynergy provides a broad range of professional services designed to assist with all aspects of property investment. Phone 1300 425 595 or visit insynergy.net.au
