Delayed home buyers looking to enter property market in 2024

The first edition of aggregator Mortgage Choice’s Home Loan Report found that 57 per cent of prospective home buyers have said they delayed deciding to buy until 2024.

The report, which was commissioned through Honeycomb Strategy, gathered responses from 1,000 consumers at a national level, aimed to gain insight into borrower sentiment, trends, attitudes, and intentions around mortgage borrowing.

According to the research, 70 per cent of respondents reported that they were feeling positive towards their property purchases (up from 59 per cent in May 2023), showing signs that potential buyers are looking to progress in their property purchasing goals.

The aggregator found that this reflected the 17.5 per cent year-on-year increase in submissions value for property purchase over the March quarter 2024 made through Mortgage Choice’s broker network.

The report highlighted a reinforced generational divide in regard to property as interest rates remained top of mind for would-be buyers, with Gen Z feeling the least confident out of all age groups, and Baby Boomers feeling indifferent to interest rate shifts.

Additionally, the research found that Millennials are feeling the crunch from cost of living, with respondents stating that this was an “especially pronounced” barrier to property buying.

Mortgage Choice CEO, Anthony Waldron, commented that the aggregator’s brokers are reporting a “sense of cautious optimism” from customers motivated to act on property plans.

“Paired with the continuing momentum we’re seeing for new purchase loans, we anticipate stronger demand in the months ahead.

“Among the reasons customers come to our brokers is because they’ll have choice of lender – helping them find the loan that’s best for what they need. They also value having an expert in their corner who can help them navigate the often-complex home loan process,” Waldron said.

Refinancing activity is down

Mortgage Choice’s report further revealed a significant reduction in refinancing activity among a backdrop of prolonged cash rate holds.

The research found that refinancing activity has dropped from 40 per cent of borrowings in the March quarter 2023 to 26 per cent of borrowings in the March quarter 2024.

Brokers have flagged that higher home loan interest rates and rising property values have made it challenging for some borrowers to refinance due to not being able to meet the serviceability requirements for a new home loan, according to Waldron.

“Another contributing factor is changes to retention policies, with some lenders offering better rates to keep existing customers.

“One of the primary factors driving the reduction in refinance activity is the fact that interest rates appear to have stabilised, with the Reserve Bank leaving the cash rate unchanged since November 2023. The fixed-rate ‘cliff’ has also now passed, with most borrowers who were on a fixed rate having already shifted to a variable rate,” Waldron added.

Furthermore, the aggregator’s data has confirmed that borrowers prefer variable-rate mortgages, with 94.7 per cent of loans submitted in the March quarter 2023 being for variable rate home loans, compared to 5.3 per cent having a fixed component.

This percentage has grown over the March quarter 2024, with 98.3 per cent of loans submitted being for variable-rate mortgage products, compared to just 1.7 per cent of submissions being for fixed-rate loans.

Waldron continued: “It’s not surprising that more borrowers are choosing variable rates. Fixed-rate home loan pricing has steadily increased, rising higher than variable rates. Gone are the days of fixed rates under 2 per cent – borrowers would now struggle to lock in a fixed-rate under 6 per cent per annum.”

[RELATED: Serviceability the ‘number one’ barrier for refinancers: MFAA]