How interest rate cuts will be the ‘turning point’ for prospective buyers

Ahead of the Reserve Bank of Australia’s (RBA) final meeting for the year, the latest Mortgage Choice Home Loan Report surveyed 1,000 consumers nationally to map out the intentions of borrowers and prospective buyers.

Anticipation around rate cuts has ramped up in recent weeks on the back of strong figures from the Australian Bureau of Statistics which placed headline inflation back into the RBA’s 2-3% target range after more than three years.

As buyers and prospective homeowners await an accompanying rate drop, 60% of respondents told Mortgage Choice that a cut would make homeownership a more achievable goal in the current environment.

Chief executive Anthony Waldron said those looking to buy in 2025 have been waiting on the RBA before putting their plans into action.

“It’s no surprise that consumers feel a reduction in home loan interest rates would make homeownership more achievable,” he said. “A rate reduction would certainly improve borrowing power and reduce home loan repayments.”

Mortgage Choice chief executive Anthony Waldron says confidence among prospective buyers is on the up. Picture: realestate.com.au

Big city pressures 

Respondents living in Sydney are the most impacted by interest rates, Mortgage Choice found, with 65% confirming their confidence was impacted, compared to 50% in other cities.

While forecasts for a rate cut have oscillated between February and April for the last few months, economists are now anticipating the first of the anticipated rate cuts for 2025 could come as late as June.

REA Group senior economist Eleanor Creagh said it was likely the Reserve Bank would want to see sustained evidence of core inflation back within target before it risked lowering rates from 4.35%.

“Underlying inflation pressures remain too strong,” she stated. “This allows the RBA to look through the fall in headline inflation.”

If the Reserve Bank does decide to cut the cash rate early next year however, Mr Waldron said it's likely the timing of some purchases in both Sydney and Melbourne will be brought forward.

Confidence returning

The report also found the recent talk of rate cuts has improved public confidence.

While 62% of prospective buyers said in June that interest rates were making them less confident when it came to buying, a smaller 54% felt the same way by October.

Mr Waldron said there were several reasons why prospective buyers might be feeling increasingly optimistic.

“With the cash rate on hold throughout 2024, home loan interest rates have remained relatively stable,” he said. “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.”

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