What interest rate cuts could save NT homeowners

Darwin homeowners could soon have more money in their pockets if the RBA cuts interest rates this month. Picture: Pema Tamang Pakhrin

Darwin home loan repayments could drop by up to $230 a month if the Reserve Bank of Australia cuts interest rates this month, but a reprieve for homeowners could mean a surge in house prices off the back of increased borrowing power.

Exclusive analysis from Compare the Market revealed what each suburb in the river city could save if interest rates were cut by 25 and 50 basis points (bp) on May 20, using median home price data and a starting interest rate of 6 per cent.

The biggest winners would be mortgage holders in Fannie Bay, where the average cost of a house is sitting at $906,771.

A 25bp cut would mean a saving of $216 a month on the mortgage of a typical Fannie Bay house, while a 50bp drop would save $230 a month.

In Lyons, where the average cost of a house is $2.4m, a 25bp cut would mean a $109 monthly saving, while a 50bp cut would equate to $216 a month off the mortgage bill.

While in Nightcliff, mortgage holders paying off an average house could expect to save $105 (25bp cut) and $209 (50bp cut) a month.

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The home at 25 Mirrakma Cres, Lyons, is for sale for offers over $945,000. Picture: realestate.com.au

At the other end of the scale, a property owner paying off a unit in Bakewell, where the median price is $292,807 would see a monthly reduction of $37 based on a 25bp and $74 based on a 50bp reduction.

In regional NT, a 0.25 percentage point rate cut would mean a monthly saving of $53 for an owner paying off a typical house and $32 for a typical unit.

While a 0.5 percentage point cut would mean $105 a month of the mortgage of an average-priced house and $65 off an average-priced house.

While those already on the property ladder can expect savings should the RBA cut interest rates, those waiting to get on will likely face price rises.

Compare the Market property expert Andrew Winter said rate cuts would boost borrowing power and buyer demand, which could lead to buyers offering more for property and causing home prices to surge.

“The markets in Brisbane, Adelaide, Perth and Sydney have been extremely resilient, and that’s largely because there isn’t enough supply to keep up with demand,” he said.

“Another round of rate cuts is likely to add fuel to the fire.”

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11 Little St, Fannie Bay, is for sale for $1.7m. Picture: realestate.com.au

Data from Mortgage Choice showed if someone could borrow the average NT loan size of $488,000 today, their borrowing capacity would increase to $501,353 with a 25bp cut.

That figure would go up to $515,281 with a 50bp cut and $544,988 with a 100bp cut.

Mr Winter said while buyers may be anxious to “get a foot in the door” before market conditions became even more competitive, the capacity to borrow more money would not make buying a house easier for most people.

“The main hurdle for most first-time buyers is raising a deposit, which can be extremely challenging when value growth outpaces wage growth in such an extreme way,” he said.

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

“Saving 5 per cent is a lot more achievable than saving 20 per cent.

“There may be a rush to beat the ‘fear of missing out’ frenzy (but) the best time to buy is when you’re ready.”

Real Estate Central director, Daniel Harris. Picture: Che Chorley

Real Estate Central director, Daniel Harris said in Darwin, buyers weren’t “sitting on the sidelines” waiting for rate cuts in a market where home prices were already trending up.

“The Darwin property market is running hot,” he said.

“The lower and mid tiers of the market in particular are only heading in one direction and that’s up.

“Buyers aren’t going to hold out for a rate cut when waiting would have cost them $50,000 to $60,000 in doing so this year alone in the lower to mid-tier of the market.”

Mr Harris said an interest rate cut later this month would help push already rising Darwin home prices up even more.

“A rate cut improves borrowing capacity and puts a bit more upwards pressure on pricing,” he said.

“It will help every market, it always does.”

A Mortgage Choice Home Loan Report survey found 71 per cent of respondents looking to buy a home were relying on their own savings to pay the deposit, 13 per cent were using a cash gift from family and 23 per cent were borrowing funds.

A total of 35 per cent of homeowners surveyed owed $250,000 – $500,000 on their primary mortgage, 23 per cent owed $100,000 – $250,000 and 18 per cent owed $500,000 – $750,000.

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