Mid-year property check-in: Tips for the prospective homebuyer

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When homebuyers enter the market they usually have some ‘ideals’ in mind. For instance, they’re seeking a community, or a view, or quite often, access to transport, schools and shops. But what happens when all the wants are put on the backburner? Suddenly needs become more important and the shortlist, well, shortens. 

This is the scenario a lot of first-time buyers face right now amid higher interest rates and a generally higher cost of living. Property prices remain relatively high too, and so that means home loan amounts tend to be larger, especially in the major capitals. Bigger price tags and therefore larger home loans - combined with higher home loan rates off the back of the Reserve Bank’s campaign of rate rises - have all made the homebuyer's task tougher.

At the time of writing the official cash rate holds at 3.85%, a level that has led to most lenders upping their home loan rates well above 5%, be it fixed or variable. And there’s no certainty about when rates will stop climbing, with some experts predicting at least another RBA increase in the coming months. And yet, locking in a fixed home loan is no longer a clear-cut tactic either because some of the fixed rates on offer are in excess of 6%. 

So it's buyers that are in a bit of a fix, having to compromise on costs and perhaps looking farther afield than they originally expected to.

Where to next? Property supply versus demand

Property firm Herron Todd White notes that market conditions like the ones at present, which are approaching what experts call the ‘bottom of the cycle’, typically draws certain buyer types. For example, first-time buyers tend to become more active, hoping to seize an opportunity as prices flatline. There are also those a little more immune to interest rate hikes such as downsizers who have the benefit of equity built up in their homes, as well as a good level of savings in some instances. High-end or prestige buyers are also cashed up and ready to go, though they aren’t as active if there are fewer homes on offer. 

For what it’s worth, the rate raising cycle appears closer to its conclusion, which might mark an end to urgent inflation concerns and maybe a return of more buyers, according to Herron Todd White. If that’s right, then this more depressed phase of the property market may be in the rearview mirror.

However, the chief issue among most experts is limited supply versus high demand. Founder of Two Red Shoes mortgage brokers, Rebecca Jarrett-Dalton says that while borrowing capacity and lending is definitely down, there’s not a lot to buy and plenty of people who want to. This is exacerbated of course by increased immigration levels - competition is high and prices aren’t dropping. 

“These factors appear to be keeping prices buoyant and there’s no real change in sight,” says Jarret-Dalton. “This could change as the impact of the rate rises really starts to bite. We’re also yet to see the bulk of the low fixed rates coming off of their fixed terms.”

Each city and market is different though, and homebuyers need to keep that in mind. Either way, general uncertainty will remain for a while, says Jarret-Dalton.

Buyer's agent at Wealth Through Property, Scott Levoune agrees with Jarrett-Dalton that the market is so big it’s hard to pinpoint overarching themes. With so many different areas and varied levels of competition, many buyers have overpaid in recent times, he notes.

“When interest rates started to rise, this directly affected the cost of living in many of these [popular] suburbs, resulting in the markets correcting in price,” says Levoune. In other words, there were steep price jumps that would have occurred if not for the covid period.

“Now there are signs that the Melbourne and Sydney markets have bottomed out, and already started to increase again in value - though we won't see the growth previously seen during the pandemic,” he adds. 

Notably, Levoune says we should start to see a steady return of buyers who have been holding out because of fear of interest rate hikes. He adds that more buyers likely returning to the market by the end of 2023 should lead to substantial growth through 2024. Of course, each area will pick back up at different times.

“While most banks and economists are forecasting there’ll be a drop in interest rates this year, we need to remember how many times they have been wrong and their advice is to be taken with a grain of salt,” says Levoune. “You should be getting in the market based on your own circumstances and not trying to actively time the market.”

Know your homebuying budget, set your expectations

It’s great to get some insight into what can be quite a complex area, which is certainly not helped by the combined forces of interest rate rises and a detrimental level of inflation. This stuff is certainly hard to sift through for the uninitiated. But still, for the less experienced buyer there are some things to keep in mind.

“Bottom line is it’s critical for a borrower or buyer to be super honest with their own budget and understand what they personally need and can afford comfortably, not stretching themselves,” says Jarret-Dalton. 

Her advice echoes Levoune in that each prospective buyer needs to think of their own unique situation and budget. 

“Look at what you’re really spending and saving and compare this to the proposed repayments, ideally with a bit of a prudent buffer built in and test how comfortable these feel,” she says. “Do you need to make changes? You can't really make absolutely correct decisions based on market factors right now so you have to make decisions based on your own circumstances.”

Timing is therefore important. To this end, Levoune says property will always be a long term game and those who try to time the market miss out, and generally end up paying more for their property. 

“Whether you're looking for a home or investment property, leveraging an experienced buyers agent who specialises in data, trends and statistics is a sure way to make sure you are not buying into a market that is dropping in value,” says Levoune. “It’s also important to stress test yourself at higher interest rates and understand your capacity on whether or not you could afford a property of higher value. Understand that when you’re starting out it’s okay to buy on the outskirts of the city.

“Generally the entry points are a lot cheaper and eventually gives you the capacity to upsize in the future.” 

It's also easy to get emotionally invested when it comes to real estate, especially when you’re up against cashed-up competitors. That’s when overpaying can happen. Perhaps the best place to round up this brief guide is to remind prospective buyers that you don’t have to play in the same pool as the cashed-up cohort. Sometimes the regional spots around our capitals offer cheaper options and have lower levels of competition. These areas, such as the Central Coast in New South Wales, can at least provide a window of opportunity to someone on a smaller budget. 

As the experts at Herron Todd White suggest, spots like this are “uniquely placed to attract and capture those being priced out, while still wishing to be close for work, family or networks.”

As we always say at Mozo, do your research. Once you've set up your budget and scouted some properties, be sure to start comparing some of the best home loans on offer, such as the ones below. The goal should be to find a loan with a good interest rate and that overall matches your gameplan. Good luck!

Home loan comparisons on Mozo

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Last updated 21 July 2024 Important disclosures and comparison rate warning*
  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Optimum Fixed Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as offset and redraw. Noapplication, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Flexibility to choose your repayment schedule (weekly, fortnightly or monthly). Redraw facility available. Split your home loan into multiple loan accounts.

  • Optimum Fixed Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as offset and redraw. Noapplication, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Express Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <90%
    Interest rate
    6.01 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,001
    Go to site

    Get online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Flexibility to choose your repayment schedule (weekly, fortnightly or monthly). Redraw facility available. Split your home loan into multiple loan accounts.

  • Fixed Rate Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Fixed 3 years
    Comparison rate
    6.15 % p.a.
    Initial monthly repayment
    $3,027

    Additional repayments of up to $10K per fixed year. Interest rate discounts available. Waiver of $499 application fee when combined with an Orange Advantage Home Loan.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.54 % p.a.
    Fixed 2 years
    Comparison rate
    7.10 % p.a.
    Initial monthly repayment
    $3,174

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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