Property shakeup: Big bank flags surprise trends since rate cuts

In a surprise move considering how badly the cost of living crisis has hit Australia, National Australia Bank has found 95% of home borrowers have elected to maintain mortgage repayments at previous higher levels despite lower interest rates.

NAB executive for home lending Denton Pugh said NAB also seen a massive 10% spike in people choosing an investment for their first property – sharing below the trends that have emerged since rate cuts and a shock forecast for what this means for the mortgage and housing market.

Australia’s property market is picking up again. With school and public holidays, an election, and a Reserve Bank of Australia (RBA) decision out of the way, we’re seeing buyers and sellers re-enter the market.

The Reserve Bank’s decision to cut interest rates again this month wasn’t a shock. With inflation now sitting comfortably inside the RBA’s 2-3% target range, most economists expected this move.

When NAB cut its variable rate back in February, we saw activity increase.

For mortgage holders, some chose to reduce their monthly repayments to free up cash, but more than 95% of NAB customers have kept their repayments at the same level to pay down their home loan quicker and save more in the long term.

On the buyer side, the cut provided a bit of a sugar hit for the market, but momentum eased in April as a mix of holidays, election uncertainty and anticipation around the RBA’s next move saw many potential home buyers hit pause.

Now that some of this uncertainty has cleared, and further cuts have been announced, more buyers are back searching for their dream home.

At NAB, we’ve seen steady growth in first home buyer activity since February, with some entering the market through investment.

We’ve seen a 10% increase this year in buyers purchasing an investment property as their first home – a trend known as ‘rentvesting’.

NAB insights show this strategy is especially popular in NSW and WA, where a home buyer buys in one suburb while choosing to rent in another.

This is a popular strategy for younger buyers who want to get on the property ladder without giving up the lifestyle or location they love.

'Myths about variable home loans': youtube.com/mortgagechoice

Through May, new listings have started to recover. Consumer confidence, which dipped in April, is also trending up. And that matters because when people feel more confident, they’re more likely to make a big purchase on something like a home.

Lower rates and growing confidence should help carry the momentum we’re seeing through the typically quieter winter months. But we’re not expecting house prices to take off in 2025.

While lower rates do give buyers a bit more borrowing power, stretched affordability and ongoing cost-of-living pressures are still holding price growth back.

So, what should potential buyers be doing now? Start by getting clarity on your borrowing power. 

With the market moving again, opportunities are there. Being ready to act can make all the difference.

* This is an opinion piece by Denton Pugh who is the National Australia Bank executive for home lending.