My Mate Waited for Rate Cuts. He Got Lower Rates and a $100K Bigger Mortgage.

I've bought over 150 properties in Melbourne. And the single most expensive mistake I see people make has nothing to do with picking the wrong suburb, overpaying at auction, or skipping the building inspection.

It's waiting.

Specifically, waiting for interest rates to drop before buying. The logic sounds bulletproof: rates come down, borrowing power goes up, I can afford a better house. In practice, it's one of the most reliably wealth-destroying strategies in Australian property.

Let me tell you about George.

George's story (it's more common than you think)

George is a real person. Mate of mine. Smart guy — engineer, good salary, sensible with money. Back in early 2020, rates had just started dropping. He was looking at a solid three-bedroom house in Melbourne's southeast. Asking price around $700,000.

He agonised. Should he buy now at 3.5% interest, or wait six months for rates to drop further and stretch to an $800,000 property? More house for less monthly repayment. The arithmetic made sense on paper.

So he waited.

Rates dropped. All the way to 2% by late 2020. George's borrowing capacity shot up by $120,000. He was thrilled. Went back to the market, ready to buy that $800K house he'd been eyeing.

Except it wasn't $800K anymore. It was $900K. And the $700K house he'd originally wanted? That was $800K now.

George bought. He got a house essentially equivalent to the one he could've had a year earlier — similar size, similar suburb, similar condition. He paid $800,000 instead of $700,000. His borrowing capacity went up by $120K, but the price went up by $100K. Net benefit of waiting: an extra $100,000 in debt for the same asset.

The interest rate was lower. The monthly repayment was similar. But the principal balance — the actual debt — was $100,000 larger. That's $100,000 more to repay over 30 years. At even 4% average interest over the life of the loan, that's roughly $72,000 in additional interest payments.

George's "saving" from lower rates cost him $172,000.

Why prices move faster than borrowing power

This isn't just George's bad luck. It's structural.

When the RBA cuts rates, it simultaneously does two things: it increases how much each individual buyer can borrow, and it increases how much every other buyer can borrow too. More borrowing power across the entire market means more competition for the same limited housing stock. Prices get bid up.

And here's the asymmetry that kills the "wait for rate cuts" strategy: property prices respond to rate expectations before the cuts happen. The market is forward-looking. By the time the RBA actually moves, the price adjustment has already occurred 1.

CoreLogic data from the last rate-cutting cycle (2019-2020) shows Melbourne house prices rose 11.4% from the first cut to the cash rate trough 2. The interest saving from the cumulative 1.5 percentage points of cuts reduced monthly repayments by roughly $580 on a $700K loan. But the price increase on that same $700K house was approximately $80,000 — requiring an additional $640/month in repayments at the lower rate.

The repayment saving: $580/month. The repayment increase from higher prices: $640/month. Net result of waiting: you pay $60 more per month, on a house that now has $80,000 more debt attached to it.

Every single rate-cutting cycle in the last 30 years has produced this outcome. Property prices rise faster than borrowing power improves. It's not even close 3.

The opportunity cost of six months

Let me put this in southeast Melbourne terms, because that's where I operate daily.

In the $650,000-$750,000 bracket — the sweet spot for investment houses in Cranbourne, Hampton Park, and Narre Warren — we're seeing prices tick up by roughly $5,000 per month. That's not speculation. That's observed movement in comparable sales over the past 18 months 4.

At the start of 2024, you could buy a decent three-bed on 600 square metres in Cranbourne for about $620,000. By mid-year, the same profile property was $650,000. Late 2024, it's pushing $680,000.

If you waited 12 months for a 0.25% rate cut, you "saved" approximately $95 per month on a $520,000 loan. But you paid $60,000 more for the house. You'd need to hold that property for 52 years of monthly savings to recoup the higher purchase price.

52 years.

And that's assuming rates stay low. Which they won't. The RBA's neutral rate sits around 3-3.5%. Today's cuts are tomorrow's normalisation.

"If you're convinced rates will keep dropping," says Joey Don, CEO of PremiumRea, "then the logical move is to buy now and benefit from both the future rate reduction AND today's lower prices. You get the rate cut anyway — you don't need to wait for it to enjoy it. Every mortgage reprices when the RBA moves."

When waiting actually makes sense

I don't want to be dogmatic about this. There are exactly two scenarios where waiting is rational.

First: your financial position is genuinely not ready. You don't have enough deposit. Your income is unstable. Your credit file has issues. In those cases, waiting isn't a market timing decision — it's a personal readiness decision. Fix the underlying problem. Then buy.

Second: you're buying in a market with demonstrated oversupply. New house-and-land developments in Melbourne's western growth corridors (Tarneit, Melton, Wyndham Vale) have thousands of lots coming online each year. Supply exceeds demand. In those markets, waiting may not cost you because prices are structurally flat 5. But you probably shouldn't be buying there regardless — oversupply kills long-term capital growth.

For established suburbs in Melbourne's east and southeast — where land is finite, supply is constrained, and population growth puts constant upward pressure on prices — waiting costs real money. Every month.

What smart investors do instead

The investors I work with who build wealth fastest share one characteristic: they buy based on fundamentals, not interest rates.

They look at: land-to-price ratio (is 80%+ of the purchase price in the land?). Rental yield (can the rent cover or nearly cover the holding costs?). Supply constraint (is the suburb running out of developable land?). Population growth (are people moving in?). And infrastructure spend (is the government investing in the area?).

If those boxes tick, they buy. Whether rates are at 6.5% or 4.5%, the underlying asset is sound. When rates eventually drop, their existing mortgage reprices automatically. They get the rate benefit without having paid more for the property.

Meanwhile, the person who waited bought the same asset at a higher price. Same house, same street, same fundamentals. Just $60,000-$100,000 more debt.

I'll take the higher rate on the lower price, every single time. Rates are temporary. Purchase price is permanent.

As one of my clients put it after the last cycle: "I bought at 5.5% and refinanced at 4%. My mate waited for 4% and paid $80K more. We're both at 4% now. But my loan is $80K smaller." That's the whole game.