The latest Mortgage Insights report from Money.com.au sheds light on key trends in Australia’s home loan market, providing crucial insights for both seasoned investors and first-home buyers navigating these turbulent times.

The average new loan size in Australia has risen by 8.8%, now sitting at $636,208, with investors seeing slightly higher figures at $648,998.

While the growth in home loans is slowing overall, the fact that new loans have risen by 8% annually tells us that demand is still strong, although cooling down slightly from the frantic pace we’ve seen in recent years.

Western Australia and Victoria leading loan growth

Western Australia and Victoria are leading the way in owner-occupied loan growth, with WA seeing a 7% increase annually and Victoria closely following with a 6% rise.

Perth has been a favourite location for investors over the last couple of years, but now Melbourne is proving to be fertile ground for buyers looking to enter the property market.

Interestingly, New South Wales and Queensland, two historically strong markets, have recorded more modest growth rates of 3% and 2%, respectively.

This signals a shift in buyer activity, as highlighted by Mansour Soltani, Money.com.au’s Home Loans Expert, who suggests that the market is transitioning back from the West to the Eastern seaboard.

He suggested that WA’s dominance in loan growth could indicate that this state has already had its moment, and the Eastern states might regain momentum in the coming years.

Investor loans are still booming

Despite the challenges in the current market, investor loans are on the rise, with their value increasing by a striking 32% year-on-year.

At the same time the number of loans has also grown by 17%, suggesting that investors are still finding opportunities, even in a softening market.

Once again, WA is leading with a 43% annual growth in investor loan numbers, followed by QLD with 21%.

This trend reinforces WA’s position as a hot spot for investor activity, though it may soon plateau as buyer focus shifts.

First-home buyers flock to Victoria

Victoria is the go-to state for first home buyers (FHBs), recording a 14% annual increase in FHB loans.

This is closely followed by NSW with a 13% rise.

Notably, Victoria now accounts for 31% of all FHB loans, largely due to more affordable property prices compared to Sydney and the availability of new developments in outer suburbs.

Melbourne’s relatively affordable options and sustained housing supply make it a prime target for those looking to get a foot on the property ladder.

Refinancing trends indicate a changing market

The report highlights an ongoing decline in external refinancing, which has dropped 24% annually.

Internal refinancing, however, is on the rise, growing by 14%.

For the first time since December 2022, new loans have outpaced refinance loans, indicating that more Australians are entering the housing market rather than refinancing.

This shift reflects fewer incentives for borrowers to switch lenders and a stabilizing market as interest rates remain relatively unchanged.

 

What about interest rates?

While the Reserve Bank of Australia (RBA) has kept the cash rate on hold, there’s been minimal movement in variable rate loans for owner-occupiers, with an average drop of just 1 basis point to 6.27%.

This slight shift reflects the stability in interest rates, despite ongoing inflation concerns.

Interestingly, the report notes that fixed rates for owner-occupiers have decreased slightly, with a 0.03% drop for three-year terms.

However, investor fixed rates have risen by 0.26% for the same period, signalling that lenders may be less inclined to lock in lower rates for investors, anticipating rate cuts in 2025.

Final thoughts

The Mortgage Insights report shows us that despite some economic headwinds, the property market in Australia is still active and evolving.

With loan growth stabilizing and refinancing decreasing, it’s clear that more Australians are looking to secure homes, and the property market is still seen as a valuable investment.

For investors as well as homebuyers, the current slowdown in our housing markets create a window of opportunity to get in before a surge of new buyer demand occurs next year when interest rate start to fall and you’ll have to compete with more buyers.

About Brett Warren
Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.