Mortgage market set to continue growth in 2024

Experts forecast its growth despite high interest rates and house prices

Mortgage market set to continue growth in 2024


By Abigail Adriatico

The mortgage market will continue its growth in 2024 even with the ongoing high interest rates and strong house prices according to experts, as reported in an article by The Sydney Morning Herald.

Experts also said that banks will continue to compete even with the period of home-loan competition that has impacted their margins in the past two years.

Angus Gilfillan, chief executive of Finspo, a mortgage broker, said that he expected the growth of the mortgage market to continue along with a period bearing more stability as interest rates stabilise, favouring first home buyers.

“The market will continue to grow, but not at the levels we saw during the pandemic,” Gilfillan said.

“It’ll be a great year for first-time buyers because there are a lot of really good government grants, and they should have relatively stable repayments for the next couple of years. But borrowers will have to look a lot harder for the best deal.”

An enduring mortgage market

Notably, the increases in interest rates in 2023 had reduced the borrowing power which made it harder for borrowers to refinance their loans as many banks raised mortgage prices on newer loans.

In the last two years, banks have been competing to attract and retain consumers through low fixed-rate loan offers and cashbacks. However, this has hurt their profit margins and caused many lenders to reverse cashbacks and raise mortgage rates.

While this had reduced its intensity in 2023, Gilfillan expects the competition to slightly increase in 2024 as there were still lenders who were aggressive in wanting to grow their market share.

Paul Ryan, senior economist at PropTrack, said that the home loan competition in 2024 was expected to remain similar to how it has been in the last six months, with the higher interest rates taking pressure off the banks’ margins and passing it on to borrowers through stronger competition.

“Banks have had a challenging funding environment, but lenders are in a good position to lend to borrowers at quite competitive rates, and they’re willing to compete on margins a bit more as interest rates have increased,” Ryan said.

Ryan also expected first home buyer activity to grow at a solid but not exceptional rate as strong house prices and high interest rates persisted.

“We’ll see continued affordability pressure in the purchasing space, but I suspect we’ll start to see it become a little bit easier for borrowers to refinance,” said Sebastian Watkins, the co-founder of Lendi Group.

“We’re probably not going to see a stronger mortgage market until sometime in the second half,” said AMP chief economist Shane Oliver. “We may start to see a pick-up in competition later in the year until the Reserve Bank starts to cut rates again, but for the time being, I suspect competition will remain fairly low.” 

Sally Tindall, director of research at RateCity, believed that the competition in the mortgage market would partly depend on the response of borrowers.

“It’s really up to customers to continue to switch, continue to haggle their lenders. Because if they do that, that will force the banks to continue to be competitive,” Tindall said.

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