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A Year of Stability Amid Economic Uncertainty

2024 was a year defined by stability in Australia’s monetary policy. After a rapid succession of 12 rate hikes between May 2022 and June 2023, the Reserve Bank of Australia (RBA) maintained the cash rate at 4.35% throughout 2024. While this provided some relief from the uncertainty of further increases, borrowers continued to face the financial pressures of elevated mortgage rates.

The Impact of Rising Rates
The earlier rate hikes had profound effects on the property market and household finances:

  • Higher Borrowing Costs: Mortgage repayments surged, straining budgets for many households.
  • Investor Sell-Offs: Investors sought to offload properties to escape mounting interest costs.
  • Owner-Occupiers: Many homeowners weathered the storm, opting to hold onto their properties despite the financial pressures.


Current Property Market Snapshot
As of September 2024, the Australian residential property market was valued at approximately AUD 11.1 trillion.

  • Mortgages: Outstanding home loans accounted for AUD 2.3 trillion, representing a low national loan-to-value ratio (LVR) of 21%.
  • Household Wealth: Residential property remains a cornerstone of financial security, with 56.3% of total household wealth tied to real estate.


Looking Ahead: Anticipating Rate Cuts in 2025
Market analysts predict potential rate cuts between February and May 2025, sparking questions about their implications:

  • Property Prices: Lower rates may rekindle demand, driving prices upward.
  • Serviceability: Borrowers will still face stringent serviceability tests, limiting access to credit despite rate reductions.
  • First-Time Buyers: Assistance from family for deposits and increased interest in outer suburbs may shape buyer behavior.


Why Australia Doesn’t Adopt Long-Term Fixed-Rate Mortgages

Unlike the U.S., where 30-year fixed-rate mortgages are common, Australia predominantly offers variable or short-term fixed-rate loans. This difference stems from several factors:

  1. Lack of a Secondary Mortgage Market: The U.S. benefits from institutions like Fannie Mae and Freddie Mac, which buy mortgages from lenders, enabling long-term fixed-rate options. Australia lacks such entities, leaving lenders to manage risks directly.
  2. Risk Management: Australian lenders favor shorter fixed terms to better manage funding risks and respond to market changes.
  3. Borrower Preferences: Historically, Australians have preferred the flexibility of variable-rate loans, which often feature lower initial costs.


While long-term fixed rates provide stability for borrowers, adopting such a model would require substantial structural changes to Australia’s financial and mortgage markets. For now, variable and short-term fixed rates remain the norm, reflecting the interplay of borrower behavior, lender strategies, and regulatory frameworks.

Alan Weiss brings over 35 years of real estate experience, offering personalised, client-focused services tailored to navigate the complexities of the Australian property market. With a deep understanding of market trends and a commitment to achieving the best outcomes, Alan ensures every client’s property journey is a success.