Home buyers ready for interest rate cuts

After several months of modest price falls, property experts are not expecting a housing market resurgence off the back of an interest rate cut.

Susie White with daughter Camilla, 9, and sons Harvey, 14, and George, 12, is hoping to sell their former home on the Sunshine Coast. Picture: Lyndon Mechielsen

After several months of modest price falls, property experts are not expecting a housing market resurgence off the back of an interest-rate cut.

All but one capital city recorded flat or falling property prices through the month of January, according to housing researcher PropTrack. The news comes as mortgage holders and home buyers ready for a February interest rate cut, with most economists factoring in a 25 basis point cut following sound inflation figures.

The 0.16 per cent price decline was led by slippage in Hobart (down 0.46 per cent), Melbourne (down 0.3 per cent) and Sydney (down 0.21 per cent).

Brisbane was the only major city to manage a modest gain, of 0.08 per cent, while Perth prices held steady and Adelaide dipped 0.08 per cent. Homes became 0.1 per cent cheaper in the ACT and Darwin in January.

While rate cuts have historically led to higher prices, The Agency’s chief executive of real estate, Matt Lahood, said buyers would likely need time to assess their finances after prolonged budget strain.

“It’ll be a slow uptake,” he said. “People will start redoing their numbers immediately and see what they can borrow.

“I’m pretty confident we won’t see FOMO (fear of missing out).”

But some are readying. Mortgage brokerage Lendi has seen a 25 per cent lift in the number of buyers applying for 90-day pre-approvals from their bank to make a purchase, compared to the six-month average.

With the major banks anticipating two to five rate cuts in this rate cycle – which would reduce the average repayment by almost $100 dollars each time – the firm’s chief operating officer, Sebastian Watkins, said homeowners should be proactive.

“Every time there is a rate cut, it makes sense to take an assessment of their existing rate and hold that up against the light of what’s available in market,” he said.

Pandemic-era rate cuts spurred the fastest housing boom on record.

REA Group senior economist Eleanor Creagh said this cycle would likely be different, with gains more subdued.

“We know that as interest rates move lower, borrowing capacities are going to increase, and we’re going to see a slight improvement in affordability, buyer confidence will likely also be boosted, and that’s probably going to drive a reversal in these small falls that we’re seeing at the moment,” she said.

Susie and Matt White recently moved their family of five down to Brisbane from the Sunshine Coast for the children’s schooling. They hope a rate cut will free up some money from each mortgage repayment, and bring more buyers into the market to help their former home at Tanawha sell. “It’s definitely positive,” Ms White said. “I think the cost of living is something everyone is feeling, and having three kids, it’s a lot.”

Ray White Buderim director Jake Loiero, who is selling the family’s home, said buyers who immediately wanted to take advantage of a rate cut were already doing their research. “Buyers are getting prepared, knowing the market will go up when it becomes cheaper to borrow,” he said.

CoreLogic’s Tim Lawless said the combination of lower mortgage rates, an increase in borrowing capacity and the chronic undersupply of new housing “could be setting the foundations” for a relatively shallow housing downturn.

Ms Creagh said further price falls were possible should the Reserve Bank hold off on a cut in February.