'A given': rate cut to bring mortgage relief

Home owners can expect more mortgage relief if the Reserve Bank cuts interest rates as widely expected but those looking to break into the housing market could see property prices rise even higher.

Traders are pricing in a 95 per cent chance the RBA board will cut its key interest rate to 3.85 per cent when its two-day meeting wraps up on Tuesday.

Nicola Powell, chief economist at property portal Domain, said it's pretty much a given.

Underlying inflation moderated to 2.9 per cent in the first three months of the year, which will reassure the RBA that they can take some restrictiveness out of the economy.

Meanwhile, Donald Trump's tariffs bolster the case for a cut to support the economy amid an anticipated global slowdown.

"Obviously, it's going to be at the forefront of their mind, the impacts that that is going to have on the domestic economy," Dr Powell told AAP.

"When you look at trimmed mean inflation, it's now within their (target) band (of two to three per cent). And we know that the RBA likes to really be guided by that trimmed mean inflation."

Most economists agree that the central bank will cut rates by 25 basis points.

That would result in the median mortgage-holder with a $600,000 debt having to pay about $90 less per month in interest repayments, assuming the banks pass it on in full.

Dr Powell said she would be surprised if they didn't, given competition among the banks for customer retention and acquisition of new loans was high.

NAB remains an outlier in calling for a 50 basis point cut, although the likelihood of that happening now has diminished following an easing in trade tensions between the US and China and strong domestic labour market data, NAB's head of FX strategy Ray Attrill concedes.

"We're still very convicted in the view that the case for policy remaining restrictive has fast disappeared, it's in the rear view mirror as far we're concerned," he told NAB's Morning Call podcast.

"Therefore, to get rates down to something closer to neutral will require the best part of 100 basis points of cuts."

If the RBA does slash rates by 100 basis points - or 75 as the market is predicting - by year's end, house prices are likely to surge.

Increased borrowing capacity for home buyers will cause demand to rise, and with the provision of new supply still hampered by high construction costs and planning bottlenecks, prices will follow, Dr Powell said.

Even before the cut is passed through to buyers, higher confidence already shows up in stronger demand.

"In the lead up to the first rate cut that occurred in February, we were already starting to see an improvement in sentiment coming from inquiry data," Dr Powell said.

And that is likely to flow through quicker in the more expensive capital city markets like Sydney and Melbourne, which are more sensitive to changes in interest rates, she said.

A model developed at the Reserve Bank by economists Trent Saunders and Peter Tulip, now at the Centre for Independent Studies, found interest rates falling one percentage point lifts home prices six per cent higher in the first year than they otherwise would've been.