August 13, 2024
Mortgage Choice Home Loan Report: outlook and experiences diverge
The quarterly Mortgage Choice Home Loan Report provides insights into Australians’ sentiment, attitudes and intentions around mortgage borrowing. It provides insight into borrower activity and trends based on Mortgage Choice home loan data and a nationally representative survey of 1,000 consumers.
Key insights from June quarter FY24
- Consumer optimism about getting a foot on the property ladder spreads with 83% of prospective buyers feeling positive about entering the market, compared to 70% last quarter.
- In the current economic climate, the outlook and experience of workers in different industries diverges, with 65% of homeowners working in healthcare reporting that they now expect it to take longer to pay off their mortgage vs 51% of those in professional services.
- There is a stark contrast between the expectations and reality of prospective buyers, as rising costs lead to delays and compromises on the type and location of the property they plan to purchase, with 62% of buyers saying their search is taking longer than expected and 32% of prospective buyers requiring multiple pre-approvals.
- Rising property prices continue to drive up loan sizes, with the Mortgage Choice national average loan size rising 9% YoY for a second consecutive quarter.
- There are indications the rental market is attracting investors, with the quarterly submission data showing the value of Mortgage Choice investment loans increasing 20.7% year on year.
Optimism spreads for hopeful buyers
The consumer insights in the Mortgage Choice Home Loan Report suggest that the stable interest rate environment is being warmly welcomed by those looking to get their foot on the property ladder, with more prospective buyers feeling positive about entering the market in 2024 – 83% in June vs 70% in April.
Mortgage Choice CEO Anthony Waldron said, “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.
“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.”
Professional Services workers feeling more optimistic about the property market
The white-collar workforce was estimated to achieve the fastest growth in jobs this year, while blue-collar workers were predicted to be most affected by the slowing economy1. It seems job security is having a positive impact on the outlook of those in professional services, with this group feeling significantly more positive (+9%) about the property market than those in other jobs.
The consumer insights in the Mortgage Choice Home Loan Report show that workers in the consumer goods and service industry are significantly more likely to be feeling financial pain, and that workers in education and healthcare are more likely to move out of the city to buy property.
Compared to other industries, workers in professional services were:
- feeling more positive about their property purchase plans – 52% vs 43%
- more likely to feel they’d benefit from Stage 3 tax cuts to save for a home – 56% vs 47%
- less likely to compromise on the size of property they planned to purchase – 44% vs 60%.
A stark contrast between expectation and reality
The Mortgage Choice Home Loan Report shows that the lack of affordable housing in the property market is presenting a major hurdle for prospective buyers, with 62% saying their search for property is taking much longer than they anticipated. The research also reveals that 1 in 3 buyers have needed to secure multiple loan pre-approvals because they haven’t found a property within the pre-approval window.
The consumer research shows 82% of prospective buyers are making compromises on their buying plans. These include planning to:
- buy in a regional area/further out from the city – 60%
- buy a smaller house – 50%
- buy an apartment instead of a house – 35%
- buy a duplex – 23%.
Prospective buyers aren’t the only group who have had to compromise, with 39% of current mortgage holders saying they had plans to make significant renovations within the first year of purchase, but delayed them due to budget constraints.
The consumer research also reveals that 83% of borrowers are needing to make sacrifices to keep up with loan repayments (up 5% from 78% of borrowers in the March quarter). And an increasing proportion of mortgage holders are anticipating home loan interest rates will rise by the end of 2024 – 61% in June vs 24% in April.
Rising property values continue to drive up loan sizes
Average loan submission size over June quarter*
| State | Value | Annual growth |
| NSW/ACT | $689,272 | 7.4% |
| VIC/TAS | $614,115 | 3.4% |
| QLD | $554,842 | 13.8% |
| SA/NT | $555,985 | 17.1% |
| WA | $505,076 | 10.6% |
| National | $594,864 | 9.0% |
*Total value of Mortgage Choice loan applications divided by number of applications submitted over June quarter.
Mr 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.
“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.
Mortgage Choice home loan submission data shows that the national average loan size rose to $594,864 – up 9% compared to the June quarter FY23. For the second consecutive quarter, the markets that recorded the most significant growth were SA/NT, QLD and WA; however, NSW/ACT and VIC/TAS remain the regions with the highest average loan size in Australia. These figures are fairly consistent with the PropTrack Home Price Index, which revealed that despite slower growth, annual national home prices grew 6.55% in June.
Rental market creating opportunities for investors
| Loan purpose over June 2024 quarter | Change in submissions value YoY |
| Owner occupied | 2.5% |
| Investment | 20.7% |
| Total | 7.1% |
The PropTrack Rental Report for the June 2024 quarter revealed that significant demand for rental accommodation remains, supply is still limited and advertised rents remain elevated, with these conditions expected to persist2.
Mortgage Choice home loan submission data reveals that the value of loans to investors rose sharply – by 20.7% – as buyers look to capitalise on increasing demand for rental property.
Value of interest-only lending rises
| Repayment type over June 2024 quarter | Change in submissions value YoY |
| Principal & Interest | 4.2% |
| Interest Only | 26.1% |
| Total | 7.1% |
Mortgage Choice home loan submission data for the June quarter shows the value of interest-only loans rising 26% when compared to the June quarter FY23.
Mr 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.”
Refinancing activity continues to trend down
| Loan purpose over June 2024 quarter | Change in submissions value YoY |
| Purchase | 30% |
| Construction | 38% |
| Refinance | -20.8% |
| Total | 7.1% |
Mortgage Choice home loan submission data reveals that the value of loans for purchases and construction continued to rise over the June quarter, while the value of loans for refinancing fell for the second consecutive quarter.
Mr Waldron said, “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.”
#Ends
For further information, or to arrange an interview, please contact:
Graciela Gomez
Mortgage Choice Corporate Communications
+61 432 520 164
graciela.gomez@mortgagechoice.com.au
1https://www.deloitte.com/au/en/about/press-room/deloitte-access-economics-employment-forecasts.html
2 https://cdn.rea-group.com/wp-content/uploads/2023/07/26180622/PropTrack-Rental-Report-June-2023.pdf
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