This post was originally published on this site.
If this week’s RBA headlines caused anxiety, it’s worth taking a step back.
Yes, the cash rate has lifted from 3.6 per cent to 3.85 per cent. But, in reality, this move simply nudges interest rates back toward their 10-year average. What Australians experienced for much of the last decade was not normal – it was emergency policy.
Inflation is still sitting above the Reserve Bank’s target band, at around 3.3 per cent, while the goal remains 2–3 per cent. This decision isn’t political or reactionary – it’s the RBA continuing its mandate to stabilise inflation expectations for the good of everyone.
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Importantly, this is not a return to the aggressive tightening cycle of 2022 or 2023. We are no longer in a “rate rise every meeting” environment. Policy settings are now incremental, data-led, and far more cautious than many headlines suggest.
One of the most persistent myths in Australian property is that interest rates determine house prices. They don’t.
Interest rates influence borrowing power, not value. Property prices are driven by fundamentals: demand, supply, and population growth.
Australia is currently facing a structural housing shortage, particularly in high-demand metro and lifestyle markets. In that environment, higher rates don’t solve affordability – they simply change who can access credit.
Tighter lending conditions don’t remove demand. They redistribute it.
This is why prices have remained resilient despite higher rates, and why relying on interest rate forecasts as a primary investment strategy is misguided.
Another detail often missed: the RBA doesn’t set your mortgage rate – your bank does.
Recently, after requesting a rate review, I reduced my interest rate by 0.75 per cent. Most borrowers never ask, and banks rely on that inertia.
In a competitive lending market, reviewing your loan is one of the simplest and most effective risk-management tools available – yet it’s routinely ignored.
Successful property investment has never been about perfectly timing rate cycles. It’s about positioning for long-term fundamentals.
That means focusing on:
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Markets with genuine supply constraints
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Strong population and employment growth
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Asset quality and scarcity
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Conservative buffers and cash-flow discipline
Interest rates will move up and down. Headlines will remain dramatic. But well chosen assets in undersupplied markets tend to perform regardless of short-term monetary policy shifts.
Watch interest rates – but don’t build your entire strategy around them.
They’re one variable in a much bigger equation. In today’s market, fundamentals matter far more than fear.
James Fitzgerald is Managing Director of Custodian and author of Bulletproof Investing. He is a leading voice on Australian property markets, monetary policy, and long-term wealth strategy.
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