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A third of borrowers are needing to secure multiple pre-approvals as they cannot find the right property in time, according to Mortgage Choice research.
The latest quarterly home loan report from franchise brokerage Mortgage Choice has revealed that a lack of affordable housing in the property market is presenting a major hurdle for prospective buyers.
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As property values continue to rise (with house prices having risen for 18 consecutive months, according to CoreLogic), borrowers are finding it harder to find a property and are increasingly needing to take out consecutive pre-approvals to continue the search.
In a survey of 1,000 consumers, Mortgage Choice found that 62 per cent of respondents had said that their search for an appropriate property was taking much longer than they had anticipated.
Moreover, one in three respondents said they had needed to secure multiple loan pre-approvals because they hadn’t found a property before their pre-approval expired (typically three months).
As such, 82 per cent of buyers said they were making compromises on their buying plans, including:
- Buying in a regional area/further out from the city (60 per cent).
- Buying a smaller house (50 per cent).
- Buying an apartment instead of a house (35 per cent).
- Buying a duplex (23 per cent).
The Mortgage Choice Home Loan Report also found that home buyers are needing to borrow more to purchase property amid rising prices.
The aggregation found that the national average loan size rose 9 per cent year on year (YoY), to $594,864, increasing for a second consecutive quarter.
Loan sizes for those in South Australia/Northern Territory have been increasing at the fastest rate, according to the aggregation group, with Mortgage Choice finding that the average loan submission size over the June quarter was $555,985, up 17.1 per cent YoY.
This was followed by Queensland, where the average loan size had risen 13.8 per cent of the year to June. The average loan size in the Sunshine State was $554,842, according to the data.
However, NSW/ACT and Victoria/Tasmania continue to have the largest loan sizes, with the average loan size coming in at $689,272 (up 7.4 per cent YoY) and $614,115 (up 3.4 per cent YoY), respectively.
Rising living costs are also affecting borrowers, with 83 per cent reporting they have to make sacrifices to manage their loan repayments, up from 78 per cent in the March quarter. Additionally, 39 per cent of current mortgage holders had intended to undertake major renovations within the first year of purchase but have postponed these plans due to budget limitations.
Speaking of the findings, Mortgage Choice CEO Anthony Waldron said: “Despite a challenging economic climate and reduced borrowing capacity, in the June quarter the national average loan size continued to remain well above 2023 levels. As a result, buyers are needing to compromise on the location and type of property they plan to buy.
“While borrowing capacities remain reduced due to higher interest rates, the Stage 3 tax cuts are expected to boost borrowing capacity in the coming months and may lead to fewer compromises for some buyers.”
An increasing proportion of mortgage holders are also anticipating home loan interest rates will rise by the end of 2024, as rhetoric from the central bank dampens expectations of a rate cut anytime soon. The survey found that 61 per cent of borrowers thought there would be another rate hike, up from 24 per cent in April.
Despite this, the Home Loan Report found that optimism was rising among prospective home buyers.
As previously reported, around 83 per cent of prospective buyers told Mortgage Choice that they were feeling positive about entering the market, up from 70 per cent last quarter.
Waldron said that buyers are “recalibrating their perspective” on interest rates and whether there is actually a “right time” to buy property.
“After hearing a range of predictions on rate movements, from forecasts that rates would fall multiple times in 2024, to speculation that rates may rise and that cuts won’t come until 2025, buyers are recognising that perhaps the right time to buy is simply when they’re ready,” Waldron said.
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