Melbourne homebuyers, and especially first-home buyers, are just days away from a major boost to their property plans.
Victoria’s typical house hunter is just days away from an up to $35,000 boost to their home buying hopes, with predictions of 2025’s second interest rate cut on Tuesday.
Figures from Compare the Market show Melbourne homeowners in almost every suburb will be saving upwards of $100 a month on mortgage repayments if the Reserve Bank slashes the nation’s cash rate by 0.5 percentage points on Tuesday.
But the real winners could be those looking to buy their first home or upgrade to a bigger one.
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Analysis by Mortgage Choice has revealed a family able to pay the state’s average $628,000 home loan today, which covers homes up to $785,000 with a 20 per cent deposit, are just days away from being able to borrow $645,000 if there is even just a 0.25 percentage point cut this week.
That number will rise to $663,000 if more bullish hopes of a 0.5 percentage point reduction are realised, while by the end of the year it is looking likely a full 1 percentage point chop over a series of RBA moves could boost their borrowing power to a whopping $701,000.
That would be enough to get that homeowner an $876,000 property.
Victoria’s $628,000 typical loan would be enough to get a family a chance at 356 Hogans Rd, Hoppers Crossing, listed for sale at $685,000-$735,000.
But a 1 percentage point reduction in interest rates could boost their borrowing power to $701,000 and give them a chance at an $830,000-$890,000 home like 2 Cara Cres, Berwick.
Australia’s fourth biggest bank, the National Australia Bank, is among those predicting a total of 1.5 percentage points worth of interest rate cuts by February next year — starting with a 0.5 percentage point reduction this week, according to chief economist Sally Auld.
Ms Auld said the RBA was in a position where they need “to play catch up”, with four further cuts possible in July, August, November and February.
Mortgage Choice Berwick broker David Thurmond said homebuyers would effectively have tens of thousands of dollars added to their budget by next weekend, as while banks would take several weeks to pass on the cut — purchases would not settle before the cut was made.
Mortgage Choice have forecast how much borrowing capacity will improve based on what families can borrow today. The figures assume a starting interest rate of 6.1 per cent.
“And we (brokers) will be able to know what they will be able to pay long before they need it formally,” Mr Thurmond said.
For many, the broker said a 0.5 percentage point rate cut by the RBA would be the big one psychologically.
“It would show they are serious about lowering rates with that big of a drop, and it will show that the RBA will be focused on one thing and one thing only: keeping the economy going,” Mr Thurmond said.
Victoria’s $628,000 average loan today would be enough to help you buy 31 Pintail Drive, Melton South, that’s listed for $710,000-$740,000 in one of the city’s most affordable areas.
Or, after a 1 percentage point rate cut, that same borrower would be able to cover the mortgage on an $800,000-$880,000 like this five-bedroom at 66 Spring Rd, Springvale South.
With a potential extra $60,000 on offer for most first-home buyers, Mr Thurmond said they would be the first to respond.
“There are five or six I’m working with who will be able to make a move after a 0.5 percentage point cut straight away,” he said.
Families looking to upsize will also likely make moves in the near future, though he noted a number of them will probably wait for home values to rise first as they look for an equity boost to their purchasing plans.
Separate Compare the Market data tracking projected mortgage costs based on loans covering 80 per cent of the median house price in 377 suburbs, shows that a 0.5 percentage point cut would be enough to cut monthly interest rate repayments by $124 a month in Melton and up to $902 a month in Deepdene.
For unit owners in the more than 250 suburbs analysed, the same parameters would lead to savings of $93 in a month in Carlton, and as much as $300 in more well-heeled areas like Beaumaris and Brighton.
The comparison website’s property expert Andrew Winter said the bigger issue for many buyers in a cost-of-living crisis would now be saving a deposit.
22 Drouin Rd, Longwarry’s $735,000-$775,000 asking price would test your borrowing power with a $628,000 loan today.
But in a few months time that same borrower would have access to enough funds for an $820,000-$880,000 property like 16 Pirra Place, Narre Warren.
“The main hurdle for most first-time buyers is raising a deposit which can be extremely
challenging when value growth outpaces wage growth in such an extreme way,” Mr Winter
said.
“The good news is there are a number of low-deposit and stamp duty incentives open to first
home buyers. Saving 5 per cent is a lot more achievable than saving 20 per cent.”
However, the prominent property pundit warned the rate cuts could also drive a “fear of missing out frenzy” and those who were ready to make a move now, could be wise to do so rather than waiting for further rate cuts.
Real Estate Buyers Agents Association of Australia Victorian representative Matthew Scafidi echoed Mr Winter’s comments, and said he’d been warning prospective homebuyers to make a move for the past three to four months.
“I do think that people will be worse off if they wait,” Mr Scafidi said.
“There are price reductions happening in some areas right now.
“Once we get a few interest rate cuts, that will shift.”
A 1 percnetage point reduction in interest rates could give those able to borrow $628,000 today enough to access more affordable homes in suburbs like Watsonia North – like this $800,000-$880,000 5 Fernlea Close address.
An average homebuyer keen to act now might be more likely to be able to afford something like 21 Clairview Rd, Deer Park, listed for $660,000-$720,000.
However, while rate cuts were likely in the months ahead, he warned off borrowing too much, with the prospect rates could well rise again in the next five to seven years – and potentially before homebuyers got a chance to significantly reduce their mortgage.
Mr Scafidi advised those who couldn’t make a move now to ensure they asked lots of questions from real estate agents later in the year, particularly seeking to establish what price the seller would accept, what was motivating the sale and how the sale would be finalised, as all of these things could help give them an edge.
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