Rate-cut potential spurs homebuyer confidence boost

The latest Mortgage Choice Home Loan Report released this week shows the current interest-rate environment is providing a welcome boost to buyer confidence.

Mortgage Choice chief executive Anthony Waldron said this sentiment was expected to drive renewed demand and price growth nation-wide throughout 2025.

“As speculation mounts that home loan interest rates could start to fall in the first half of 2025, prospective buyers are feeling more confident about their purchase plans,” Mr Waldron said.

Close to a quarter (23%) of those planning to buy this year put their confidence down to the current interest-rate environment, the report found, up from 17% in the September quarter.

Money markets are largely backing speculation that the Reserve Bank of Australia will slash interest rates next week after 14 months, pricing in a 93% chance ahead of 18 February.

Assuming a current mortgage rate of 6.26%, REA Group executive manager of economics Angus Moore confirmed a cut of just 0.25% next week could see repayments on a $500,000 mortgage ease by $972 a year.

Strong markets the most confident

Prospective buyers in Queensland and Western Australia are currently the nation’s most confident, the report showed.

The market in both states continued to record notably strong growth against the rest of the country, despite the persistence of high interest rates which have left mortgage holders feeling pinched.

The January 2025 PropTrack Home Price Index showed Western Australia had seen record-breaking home-price growth in the past 12 months, up 13.4% to a median $561,000. Meanwhile, the median price of a home in Queensland had increased by 9.3% in the past year to reach $715,000.

“Both the Western Australian and Queensland property markets are proving attractive,” Mr Waldron said. “When you consider that national home prices have risen over 46% over the last five years, it’s unsurprising that Australians hold such a strong desire to own property.”

In another sign confidence levels among buyers were rising, Mortgage Choice noted an uptick in the number of Australians wanting to buy a property alone in the December 2024 quarter.

A total of 40% of prospective buyers said they were planning to purchase a home on their own, up by 3% from the September 2024 quarter.

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Respondents' top reason for buying their next property was the desire for an investment property – selected by 39% of the 1000 consumers surveyed. The next most popular response was the need for a larger home, with 28% of the respondents identifying space as their reason to buy. 

Submission data from Mortgage Choice shows the value of investment loans rose throughout the December quarter, up nearly 24% year-on-year.

Investment-loan appetite in the quarter was stronger than that for owner-occupied properties, with WA and QLD once again driving the increase.

“Both markets are proving attractive for property investors thanks to strong population growth, relatively more affordable properties compared to Sydney and Melbourne, high rental yields and low vacancy rates,” Mr Waldron said.

“Owning a home has long-been the great Australian dream and despite the challenges of getting into the market, our survey shows Australians still see property as the key to building their wealth.”