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Should I wait for rates to fall before buying a property?

April 7, 2024

Delaying the decision to buy a home in hopes of interest rate reductions poses significant risks. 

Frankly, with the number of buyers attending open house inspections increasing by around 30% month-on-month, as indicated by data from Raine & Horne, few are opting to take this gamble on interest rates.  

Interest rate fluctuations often defy predictions, and potential reductions of the official cash rate by the Reserve Bank usually depend on a downward trend in inflation. For those seeking a home, whether as first-time buyers or upgraders, the speculation surrounding future rate cuts may prompt uncertainty about the ideal timing for making a property purchase. Let’s weigh the pros and cons of waiting.

It’s important to note that no one, not even the most experienced economists, can guarantee a decrease in interest rates. However, should rates decline, it could significantly enhance your borrowing ability. This could mean the difference between purchasing a higher-quality home or securing property in a more desirable location.

Furthermore, delaying your purchase until rates drop might increase the likelihood of passing a lender’s “stress test.” Lenders must assess whether you could manage mortgage payments if the loan rate were 3% higher than the rate, you’re currently being offered[i].

The dangers of waiting for rates to fall 

Delaying your purchase decision carries the main risk that prices will escalate. Australian real estate values have surged by 10.2% since January 2023, translating to approximately $71,832 in dollar terms. This upward trend has persisted despite successive interest rate hikes and cost-of-living challenges.

Forecasting house prices can be challenging but at Raine & Horne we anticipate continued growth in property prices in 2024. This expectation stems from Australia’s remarkably constrained housing market supply and the potential for interest rate cuts that drive buyer confidence.

When is the right time to buy?

Navigating the uncertainties and potential scenarios can render it challenging for homebuyers to pinpoint the best time for purchasing. However, a straightforward solution exists.

The best time to buy a home is when you’re ready.

Since purchasing a property represents a significant financial undertaking, it’s crucial to be at ease with this decision and to ensure your finances are well-prepared to handle a home loan. Obtaining preapproval for a home loan, with the guidance of a financial expert like Our Broker, can provide peace of mind. 

[i] https://www.apra.gov.au/housing-lending-standards-reinforcing-guidance-on-exceptions