Buyers Struggle as Mortgage Rates Climb in Australia

In 2021, the fear of missing out (FOMO) sent thousands of Australians rushing into the property market. A new report from CoreLogic shows that 2021 was a standout year for home purchases, with an estimated 549,000 homes sold, or 5.3% of the housing stock. This was primarily driven by historically low interest rates and the effects of COVID-19, which saw many people saving more money while stuck at home.

Fast-forward to 2024, and those buyers are now feeling the financial pressure. Many who jumped into the market during the 2021 property boom struggle to keep up with rising mortgage costs, as interest rates have surged and repayments have ballooned.

The Mortgage Repayment Strain

One of the most significant challenges facing 2021 buyers is the sharp increase in mortgage rates. CoreLogic’s data shows home values have increased by 7.6% since the end of 2021. While this might sound like good news, those who waited until 2022 to buy have seen an even more significant return on their investment, with property values rising by 13.1%.

Unfortunately, for those who bought in 2021, the real pain comes from the rise in mortgage rates. Average rates for owner-occupiers have increased by 335 basis points, leading to an approximate 50% increase in mortgage repayments. This has left many buyers with a severe "sticker shock" as their financial situation becomes more challenging.

Market Differences Across Australia

While these national trends paint a broad picture, each city tells its own story. For example, Hobart stands out regarding homes being purchased earlier than in most other areas. The most common last sale date in Hobart was 2017, and since then, property values have jumped by an impressive 45.7%.

In contrast, Perth saw the highest rate of stock sold in 2024, with 3.2% of properties changing hands. On the other hand, Brisbane has seen the highest transaction rate over the last five years, with nearly a quarter (24.6%) of its housing stock being sold. These statistics show that while the property market is often viewed as a long-term game, many areas see faster turnover and shifting investor strategies.

Looking Ahead: What’s in Store for 2024 and Beyond

CoreLogic’s outlook for 2024 predicts that around 4.9% of the housing stock will see new sales by the end of the year. However, buyers should prepare for a wait before they see strong returns on their investments. Eliza Owen, CoreLogic's head of research, points out that while the situation will improve, particularly with a predicted drop in the cash rate in 2025, short-term capital growth might be limited.

There’s still uncertainty about whether turnover rates will increase in 2025. While easier borrowing conditions could boost confidence, affordability will remain a significant hurdle for many, especially with the ongoing cost of living pressures, such as high childcare and energy costs.

Nfinity Financials’ Advice for Buyers

At Nfinity Financials, we know how important timing is when buying property. The property market can be tricky, especially with fluctuating interest rates and economic conditions. Whether you're a first-time buyer or an experienced investor, our team is here to guide you through these changes and help you make decisions that align with your long-term financial goals.

The key lesson from 2021 is that while acting quickly can sometimes pay off, being well-prepared and patient is just as important. The property market is constantly changing, and by working with a trusted mortgage broker and staying informed about market trends, buyers can position themselves for success, even during uncertain times.

If you're considering refinancing, buying a property, or just exploring your options, Nfinity Financials is here to help you navigate the market and secure the best deal possible. After all, the property game is about making intelligent choices, and we're committed to ensuring you make the right ones.

For more detailed information, read our related Articles. Call us at 0405 593 807 to book a consultation today. Need more help? Schedule an appointment at https://team.nfinityfinancials.com/paragdixit/. We're here to assist you with your mortgage needs every step of the way!