A recent report has detailed the themes that have had an effect on the mortgage industry over the June quarter.
Buyer optimism
As we power through the second half of 2024, optimism appears to be rising among prospective home buyers. According to the Mortgage Choice Home Loan Report, 83 per cent of those in June looking to enter the property market felt positive about it, compared to 70 per cent in April.
“Buyers are recalibrating their perspective on interest rates and whether there is in fact a ‘right time’ to buy property. After hearing a range of predictions on rate movements, from forecasts that rates would fall multiple times in 2024, to speculation that rates may rise and that cuts won’t come until 2025, buyers are recognising that perhaps the right time to buy is simply when they’re ready,” said Mortgage Choice CEO Anthony Waldron.
“While the consumer research in the Mortgage Choice Home Loan Report shows that prospective buyers are feeling more optimistic, the findings also highlight the divide between those working in professional services and those in other industries.”
The analysis revealed that white-collar workers are expected to achieve the fastest growth in jobs this year, while blue-collar workers were predicted to be most affected by the slowing economy. Meanwhile, consumer goods and service industry workers are significantly more likely to be feeling financial pressure and workers in education and healthcare are more likely to move out of the city to buy property.
A tougher market
There are a variety of issues plaguing the housing industry, culminating in pain for prospective home buyers. One major issue is rising property values, with 62 per cent taking longer than expected to buy a house due to a lack of affordable options.
This means many are having to compromise on purchases. In fact, 82 per cent of prospective buyers said they’re making compromises:
- Buy in a regional area/further out from the city (60 per cent).
- Buy a smaller house (50 per cent).
- Buy an apartment instead of a house (35 per cent).
- Buy a duplex (23 per cent).
Waldron said: “Despite a challenging economic climate and reduced borrowing capacity, in the June quarter the national average loan size continued to remain well above 2023 levels. As a result, buyers are needing to compromise on the location and type of property they plan to buy.”
The average loan size nationally over the June quarter was $594,864, representing a 9 per cent annual increase. Broken down, the average loan size for each part of Australia was:
- NSW/ACT: $689,272 (7.4 per cent annual growth)
- Victoria/Tasmania: $614,115 (3.4 per cent annual growth)
- South Australia/Northern Territory: $555,985 (17.1 per cent annual growth)
- Queensland: $554,842 (13.8 per cent annual growth)
- Western Australia: $505,076 (10.6 per cent annual growth)
“While borrowing capacities remain reduced due to higher interest rates, the Stage 3 tax cuts are expected to boost borrowing capacity in the coming months and may lead to fewer compromises for some buyers,” said Waldron.
Refinancing and interest lending
Despite the mortgage pressure felt, refinancing has seen a drop in 2024. The change in refinance submissions over the last year has fallen 20.8 per cent.
“With the majority of the fixed rate refinancing now done and cashbacks dropping out of the market, the level of refinance activity has fallen significantly over the last six months. I encourage borrowers to be proactive with their home loans – even in a stable interest rate environment, it’s a good habit to meet with your mortgage broker at least once a year to review your home loan and discuss your plans,” said Waldron.
However, interest-only lending has witnessed a sharp increase over the year, climbing 26.1 per cent.
Waldron said: “Our submission data reveals a rise in interest-only lending over the June quarter, which is expected given we also saw an increase in the value of loans to investors over the period.”
[Related: Whether cheap or expensive, demand for property remains high]
