Why waiting for interest rate cuts to buy a home is a bad idea

A smiling couple stand in the doorway of a home as a real estate agent explains something to them

Maybe you’re holding back on buying a home in early 2024 in the hope interest rates will come down – but it’s a very risky move. 

“Do not wait for rate cuts to make things affordable. If you can get in now, the sooner, the better,” says Mozo finance expert, Peter Marshall. 

He warns would-be buyers should consider property prices alongside any potential rate movements.

Home loan interest rates have been in the spotlight for over a year and a half since the Reserve Bank of Australia (RBA) began to flex its monetary policy muscles back in May 2022. 

Not only have the 13 RBA interest rate rises over the last 15 months brought the cash rate up to 4.35%, but it’s brought those with a mortgage plenty of pain. 

So, if you’re holding off from buying your first home due to the challenge of reading rate movements and the pressure of higher rates on mortgage repayments, you might want to consider why buying now might be the better option.

The interest rate is not the bulk of your repayment 

Marshall believes people forget that the interest rate isn’t the bulk of their mortgage repayments – it’s the principal, or the initial amount of your loan before you’re charged interest. 

This means house prices might pose more of a threat to your affordability than rates. 

Back in December, Domain predicted that an interest rate cut will spark housing demand this year, leading to another upswing in prices. 

Higher house prices mean you’ll likely need a larger loan, thus increasing your repayments. 

“So, purchasing a cheaper property now saves much more money than waiting for a cheaper interest rate,” says Marshall. 

“Don’t wait for property prices to increase more.”

It might be a struggle at first but rate cuts will come

Marshall says that rates will only prove to be a problem for a little while.  

“Rate cuts will come. If you have to max out now and go, ‘Okay, we’re going to struggle for a while,’ you can be reasonably confident that the interest rate on your mortgage will start to drop before the end of this year.”

When, exactly, is a matter of much deliberation. But, the economic brains at Westpac and CommBank forecast a 25 basis-point cut in September 2024, while NAB believes it’ll happen in December. 

A low home loan interest rate is still key 

That’s not to say finding an affordable interest rate now isn’t still important. 

While we can reasonably expect interest rates to drop after rates are cut, the savings won’t hit borrowers’ bank accounts straight away. 

“Usually, it takes banks a couple of weeks to announce rate changes and a month for that to reflect in your mortgage repayments. Homeowners are probably looking at two months after the first RBA rate cut announcement to feel some relief,” says Marshall. 

In the meantime, borrowers can compare home loans to find a competitive rate and keep an eye out for home loan features that might help them save money, like offset accounts for example.

The median variable rate (OO, P&I, $400k, <80% LVR) in our database at the time of writing is 6.47% p.a., but we track variable rates as low as 5.79% p.a. 

So if you’re looking to make the leap and buy your first home in 2024, get your journey started by checking out some of the featured home loans below, or visit our home buying guides for more information.

Home loan comparisons on Mozo - last updated 25 February 2024

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  • Mozo Expert Choice Badge
    Home Fixed Rate

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.80% p.a.
    fixed 3 years
    6.05% p.a.

    Enjoy the security of a competitive fixed interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply). Mozo Experts Choice award winner.

    Compare
    Details
  • Mozo Expert Choice Badge
    Home Variable Rate

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    6.15% p.a. variable
    6.15% p.a.

    Enjoy a competitive variable interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply) Mozo Experts Choice award winner.

    Compare
    Details
  • Straight Up

    Obliterate, Owner Occupier, Principal & Interest, <50% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.24% p.a. variable
    6.24% p.a.

    Get a low variable rate depending on your deposit with Athena’s Straight Up Variable Home Loan. AcceleRATES feature helps you to reduce your home loan even faster (T&Cs apply). Zero fees to pay. Free redraw facility. Handy mobile app to manage your home loan.

    Compare
    Details
  • Neat Home Loan

    Owner Occupier, Principal & Interest, LVR <60%

    interest rate
    comparison rate
    Initial monthly repayment
    6.09% p.a. variable
    6.11% p.a.

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

    Compare
    Details
  • Straight Up

    Obliterate, Investor, Principal & Interest, <50% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.34% p.a. variable
    6.34% p.a.

    Investors get a low variable rate depending on your deposit with Athena’s Straight Up Investor Variable Home Loan. AcceleRATES feature helps you to reduce your home loan even faster (T&Cs apply). Zero fees to pay. Free redraw facility. Handy mobile app to manage your home loan.

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    Details
  • Flex Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR <60%

    interest rate
    comparison rate
    Initial monthly repayment
    6.64% p.a.
    fixed 3 years
    6.52% p.a.

    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

    Compare
    Details
  • Fixed Rate

    Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.54% p.a.
    fixed 2 years
    7.10% p.a.

    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.

    Compare
    Details

* 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.

^See information about the Mozo Experts Choice Home Loan Awards

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