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Today: Jun 14, 2024

2024: Mortgage market thrives despite soaring rates and prices.

1 min read

Despite high interest rates and strong house prices, experts predict that the mortgage market will continue to grow in 2024. The CEO of Finspo, Angus Gilfillan, expects the market to “grow, but not at the levels we saw during the pandemic.” He anticipates a period of more stability as interest rates stabilize, benefiting first-time home buyers. However, borrowers will need to search harder for the best deals as interest rate increases in 2023 have reduced borrowing power and made it more difficult to refinance loans.

Over the past two years, banks have engaged in a “mortgage price war,” offering ultra-low fixed-rate loans and cashbacks to attract and retain customers. This intense competition has eroded banks’ profit margins, leading many lenders to wind back cashback offers and raise mortgage rates. While the intensity of the price war decreased in 2023, experts predict that mortgage competition will increase slightly in 2024, as some lenders strive to grow market share at the expense of larger players.

Statistics from the Australian Prudential Regulation Authority showed that all four big banks and Macquarie grew their owner-occupied housing loans in November. Home loans for owner-occupied properties increased by 1.1% for Macquarie and 0.6% for Westpac and ANZ. Commonwealth Bank had the lowest increase at 0.1%.

The senior economist at PropTrack, Paul Ryan, expects home loan competition in 2024 to remain similar to the past six months. Higher interest rates may relieve some pressure on banks’ margins and encourage stronger competition. However, strong house prices and high interest rates may dampen first home buyer activity, although it is still expected to grow at a solid rate. Monthly house-price growth slowed to 0.4% in December, but national average home prices rose 8.1% in 2023.

The co-founder of Lendi Group, Sebastian Watkins, believes that 2024 will be a challenging year for first-time home buyers but expects innovation from lenders and government bodies in the refinancing space to ease some of the challenges. While competition among the big four banks is expected to continue, most lenders will have limited room to move due to pressures on their margins. Watkins predicts tit-for-tat pricing among the major banks as they vie for market share.

AMP chief economist Shane Oliver anticipates a continued constrained mortgage market for another six months, especially if interest rates remain high. He suggests that competition may pick up later in the year once the Reserve Bank starts cutting rates again.

RateCity director of research Sally Tindall believes that competition in the mortgage market will depend on how borrowers respond. She encourages customers to continue switching and negotiating with lenders to maintain competitiveness within the market.