How much rate cuts could save Hobart homebuyers

Lower loan payments or increased buying power, what will a rate cut or two do for you?

Homeowners in greater Hobart’s most affordable suburbs could save over $100 every month off their mortgage should interest rates drop further this year.

Data analysis by Compare the Market — starting from an interest rate of 6.01 per cent — revealed that median-priced house owners in New Norfolk and Risdon Vale could have an extra $117 back in their budget following a 0.5 per cent rate cut, assuming their lender passed on the cut in full.

It stands to reason that owners in prestigious Sandy Bay could pocket the biggest savings from their large loans. It was the only suburb set in the research to see payments decrease by over $300 per month in the event of a 0.5 per cent cut.

Eleven suburbs would be set to save over $200 per month with a double-sized cut.

Lifestyle acreage destination Sandford owners could pocket $271, followed by $263 in Tranmere, $245 in Taroona, $238 in West Hobart and $230 in North Hobart.

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Buying power set to increase with forecasted interest rate cuts.

Compare the Market’s research showed how much borrowing capacities will shift should expected rate cuts come to fruition.

A household that is able to pay Tasmania’s average home loan, $487,000 — which covers homes up to $608,750 with a 20 per cent deposit — could be able to borrow $500,325 with a 0.25 per cent cut, $514,225 with a 50 basis points reduction and $543,871 with a 100bp cut.

Compare the Market property expert Andrew Winter said if the cash rate is reduced by 1 per cent this year, it could send prices soaring.

He said aspiring buyers may be anxious to “get a foot in the door” now before market conditions become too competitive.

“It’s nearly impossible to strategically time the market. The best time to buy is when you’re ready,” he said.

“If that time is now, you have a deposit saved, and you like a property, don’t wait to make a move.”

Emmanuel Marios is the chief executive and principal of Derwent Finance. Picture: Breeana Dunbar

Derwent Finance principal and chief executive Emmanuel Marios said these potential rate cuts would make a big difference to many budding homeowners in Hobart.

“Even small increases in borrowing power can make a big difference — especially for first-home buyers who are often operating on tight margins,” Mr Marios said.

“Right now, we’re seeing a lot of first-home buyers focusing more on what their repayments will look like rather than the total loan amount.

“Instead of asking, ‘Can I borrow $500,000 or $550,000?’ they’re asking, ‘Can I afford $750 a week in repayments?’

“An increase in borrowing power gives them a bit more flexibility within that mindset — maybe it’s an extra bedroom, a better location, or simply being more competitive in a hot market.”

Property expert Andrew Winter.

Mr Winter said the capacity to borrow more money does not guarantee that it will be easier to secure a property.

Mr Winter said the main hurdle for most first-time buyers remains raising a deposit.

He said this can be “extremely challenging” when value growth outpaces wage growth.

“The good news is there are a number of low-deposit and stamp duty incentives open to first home buyers,” Mr Winter said.

After years of flat to mild growth and price reductions in Hobart’s median value, an increase in borrowing capacity could be enveloped by future price growth.

PropTrack’s Market Outlook forecast predicted up to 3 per cent growth in Hobart this year, or an increase up to $21,000 on a typical $700,000 home.

If many buyers suddenly have more borrowing power, Mr Marios said demand can put upward pressure on prices, especially in popular suburbs.

“A $30,000 to $50,000 increase in borrowing power might just keep pace with the rising market, rather than give anyone a competitive edge,” he said.

“This change actually stands to benefit current homeowners more than buyers.

“Increased borrowing capacity across the board can help drive up property values, meaning existing owners could see equity growth — especially if they’re not looking to sell or upgrade right now.

“Plus, homeowners who refinance in the current climate might find they can access more equity for renovations, investing, or consolidating debt, thanks to improved borrowing conditions.

“In contrast, buyers are often still playing catch-up with rising prices.”

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