Back RBA Cut with Home Loan Buffer Cut: Villawood
The Reserve Bank’s latest interest rate cut needs to be matched by cutting the home loan buffer charged by banks if affordability is to be returned to the property market, according to developer Villawood Properties.
Villawood welcomed the latest RBA cut but warned that without a cut by the APRA banking watchdog to the home loan serviceability margin new homes would remain out of reach for many desperate new home buyers.
Affordability has become the prime concern of new buyers, with statistics such as Finder’s First Home Buyer Report 2025 showing the average buyer can only afford to purchase in one in six Australian suburbs.
Easing the interest rates load only does so much, said Villawood executive director Rory Costelloe.
“Cutting the APRA-enforced buffer banks charge from 3 per cent back to the pre-Covid 2.5 per cent rate, is the best way to ease the load on new buyers without threatening inflation,” he said.
“Everyone has been expecting the RBA to cut rates again, maybe twice, before the end of the year. But it’s also high time the banking watchdog cut the 3 per cent buffer back to safeguard the housing sector, help those desperate first homebuyers still unable to enter the market and boost the economy.”
Mr Costelloe said the country was running on a “two-speed economy”, with confidence in the new home market “in all states except Victoria, where construction costs and planning delays are hurting land and home supply”.
“APRA seriously needs to reinstate the pre-pandemic 2.5 per cent home loan margin to help re-boot the market and tackle the housing crisis,” he said.
“This would be the least inflationary means of getting more housing starts going and prevent governments falling further behind on their housing targets.”
Mr Costelloe said the industry was losing sales from people who pay a deposit on a block or house-land package, only to then discover the impact of the 3 per cent margin forces them to cancel their purchase.
“Of course, families already paying home loans need some relief from the pressure they face. The RBA has a real opportunity right now to help ease their pain.”
