Interest rate drop to spur home buying activity: Mortgage Choice

Major brokerage Mortgage Choice has released its quarterly Home Loan Report, which draws on home loan submission data from Mortgage Choice and a nationally representative survey of 1,000 consumers.

The report has revealed that 50 per cent of respondents living in Sydney and 48 per cent living in Melbourne are waiting for a fall in house prices or home loan interest rates before potentially purchasing property in 2025.

Mortgage Choice CEO Anthony Waldron noted that if the Reserve Bank of Australia decided to cut the official cash rate in early 2025, these prospective buyers could bring forward their plans to purchase property.

Interest rates are a major factor for prospective buyers contemplating property purchase, with the report showing that nearly 60 per cent of all respondents said lowering interest rates would make home ownership a more achievable goal for future generations.

This was followed by stamp duty reform (49 per cent) and lowering the interest rate buffer for mortgage approvals (37 per cent).

“It’s no surprise that consumers feel a reduction in home loan interest rates would make home ownership more achievable,” Waldron said.

“A rate reduction would certainly improve borrowing power and reduce home loan repayments.”

Future rate cut fuels hope

The survey has indicated that prospective buyers are feeling slightly more hopeful this quarter compared to the previous quarter (46 per cent versus 43 per cent).

It also showed a shift in the impact interest rates are having on confidence, with fewer prospective buyers saying that interest rates had made them less confident to buy (54 per cent in October, which was down from 62 per cent in June).

Respondents living in Sydney are the most impacted by interest rates, with 65 per cent saying their confidence took a hit, compared to 50 per cent in other cities.

Meanwhile, a third of all respondents reported feeling anxious this quarter, down from 39 per cent in the previous quarter.

“There are a couple of reasons why prospective buyers might be feeling more optimistic about their purchase plans,” Waldron said.

“With the cash rate on hold throughout 2024, home loan interest rates have remained relatively stable. We’ve also seen an increase in the availability of homes to buy, with the PropTrack Listings Report revealing that new listings in September 2024 reached their highest volume since September 2015, giving buyers more choice and more time in their purchasing journey.

“We asked survey respondents who identified as prospective buyers when they were hoping to buy, and 20 per cent said this summer, and 23 per cent said they were hoping to purchase in autumn 2025.”

Average loan sizes climb

A combination of rising interest rates and property prices led to a rise in average loan size, rising by over 10 per cent nationally to almost $612,000, Mortgage Choice data showed.

For the September quarter, average loan sizes were higher within every state and territory, with South Australia/Northern Territory (16.2 per cent) and Western Australia (15 per cent) recording the highest annual growth.

While NSW and ACT registered the lowest annual growth of 7.1 per cent, the average loan size value was the highest at $706,026.

“When you consider that average loan sizes have grown for the last three quarters, it’s no surprise that prospective buyers are waiting for home loan interest rates to fall to put their purchase plans into action,” Waldron said.

“While most economists predict that a rate cut is coming, the timing of that cut remains uncertain – especially given the latest data from the Australian Bureau of Statistics shows that underlying inflation remains high and employment growth is strong. My advice to hopeful buyers would be to buy when you’re ready and avoid trying to time the market.”

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