What you need to know about home loans in 2024

Deciding on a home loan is never an easy undertaking. When adding it to the growing checklist of things to do to either jump on or move up the property ladder—amid rising interest rates and soaring property prices, nonetheless—doing your home loan due diligence is imperative in order to gain the greatest benefits your individual circumstances.

In 2024, the average home loan in Australia was $615,174, showing a 2.3% increase when compared to January 2023, according to the Australian Bureau of Statistics (ABS) data. For first-time home buyers, the average loan amount rose from $485k to $514k, revealing borrowers are taking on bigger debts than ever before to secure their dream of home ownership.

For those seeking to refinance their mortgage, activity remains high as borrowers look to switch lenders to better manage persistently high interest rates. In June 2023, the value of total refinancing between lenders was 12.6 per cent higher compared to June 2022, according to ABS data.

While Australian borrowers started the year with a 4.35 % rate, Dean Sacco, director and finance specialist at Urban Finance Co, says that the Reserve Bank of Australia has changed its language in recent months, with the expectation that the cash rate has peaked, giving buyers more confidence with their home loan repayments.

“Low stock levels are proving difficult for buyers but those who are motivated, with good incomes and good credit, will be successful in 2024,” says Sacco.

Here’s what you need to know.

What is a home loan?

When purchasing a home, a bank or a loan provider will lend money to the borrower in order to finance the purchase of a property. This is what home loan is, at its core. Of course, home loans come with certain caveats, such as a timeframe that the lender and borrower will agree on for the loan to be paid back. A payment schedule will also be decided on, which could be fortnightly or monthly, which can impact the amount of money repaid over time. And in addition, a borrower will be required to pay interest, which will be determined by the lender.

And what is refinancing? How does it work?

In its simplest form, refinancing is when you switch from your current loan to a new one, either with the same provider or a new one in order to obtain better terms on your mortgage. There are two types of refinances, which include external refinance, when you leave your current lender and switch to a new lender, and internal refinance, when you stay with your current lender, but make changes to your loan agreement.

In 2024, which bank is best for refinancing options?

While each case will be different and specific to the individuals at hand, according to Sacco, there are several banks in Australia currently offering great cashbacks for refinancing, such as ANZ and ME Bank.

“Gateway Bank, Heritage Bank and Adelaide Bank are also offering some competitive variable rates at the moment for owner occupiers,” he adds. “And Teachers Mutual, Beyond Bank and ubank are offering some competitive variable rates at the moment for investors.”

Is it better to refinance with the same lender?

If you’re looking to refinance, often, you can avoid certain refinancing costs if doing so with the same lender, but it’s always smart to shop around and compare offers available. When looking to refinance, certain lenders will also offer competitive products and rates which could prove beneficial.

Is it good to refinance a loan?

At the end of the day, you want your loan (your mortgage) on terms that work best for you. Refinancing a loan allows you to obtain better terms on your mortgage, and in the process, can not only save you money but can help you pay off your home loan sooner. “You can also access equity to pay out higher interest debts, purchase a car or invest in property,” adds Sacco.

There are some drawbacks, however. Most notably, the potential for refinancing fees which, in some cases, are unavoidable.

Does refinancing hurt your credit?

There’s a misconception that refinancing automatically affects your credit score – it’s not always the case.

“Multiple credit enquiries in a short period of time or applying for buy now, pay later debts are two examples that lower your credit score,” explains Sacco. “This signals to new lenders that you are potentially a higher risk borrower.”

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If you are looking to for the very best home loans to consider right now — or perhaps looking to refinance to suit your current needs — here are ten home loans to consider in 2024.

1. ANZ

Variable home loan
Variable rates from 6.64% p.a.
No ongoing fees
$0 ANZ set up

2. ubank

Variable home loan
Variable rates from 6.14% p.a.
Free extra repayments
$0 application
$0 ongoing fees
Redraw available

3. Macquarie Bank

Fixed home loan
3 year fixed rates of 5.99% p.a
$0 application fee
$0 ongoing fee

4. IMB Bank

Fixed home loan
2 year fixed rates of 5.99% p.a
$449 application fee
$0 ongoing fee
Eligible refinancers can get $2,000 cashback when switching their loan of at least $500k to IMB

5. ING Bank

Variable home loan
Variable rates from 6.14% p.a.
$0 application
$0 ongoing fees

6. Bendigo Bank

Variable home loan
Variable rates from 6.01% p.a.
$0 application
$10 per month ongoing fees
Redraw available

7. Newcastle Permanent

Variable home loan
Variable rates from 6.04% p.a.
$595 application fee
$0 ongoing fees
Eligible refinancers who apply online and borrow $250K+ (LVR 80% or lower) can get a $3,000 cashback

8. BCU Bank

Fixed home loan
2 year fixed rate of 5.99% p.a.
No establishment or annual ongoing fee
5% deposit required

9. HSBC

Variable home loan
Variable rates from 6.09% p.a.
Enjoy free extra repayments, online redraw and no ongoing monthly service fees

10. UP

Fixed home loan
4 year fixed rate of 5.80% p.a
10% deposit required
No application, monthly or annual fees

Talk to a broker or financial advisor for advice specific to your needs

There has been a substantial increase in the number of Australians earning high incomes who are renting their homes instead of owning them, and this may be another element contributing to higher market demand and continually rising rents, according to new research.

The portion of households with an annual income of $140,000 per year (in 2021 dollars), went from 8 percent of the private rental market in 1996 to 24 percent in 2021, according to research by the Australian Housing and Urban Research Institute (AHURI). The AHURI study highlights that longer-term declines in the rate of home ownership in Australia are likely the cause of this trend.

The biggest challenge this creates is the flow-on effect on lower-income households because they may face stronger competition for a limited supply of rental stock, and they also have less capacity to cope with rising rents that look likely to keep going up due to the entrenched undersupply.

The 2024 ANZ CoreLogic Housing Affordability Report notes that weekly rents have been rising strongly since the pandemic and are currently re-accelerating. “Nationally, annual rent growth has lifted from a recent low of 8.1 percent year-on-year in October 2023, to 8.6 percent year-on-year in March 2024,” according to the report. “The re-acceleration was particularly evident in house rents, where annual growth bottomed out at 6.8 percent in the year to September, and rose to 8.4 percent in the year to March 2024.”

Rents are also rising in markets that have experienced recent declines. “In Hobart, rent values saw a downturn of -6 percent between March and October 2023. Since bottoming out in October, rents have now moved 5 percent higher to the end of March, and are just 1 percent off the record highs in March 2023. The Canberra rental market was the only other capital city to see a decline in rents in recent years, where rent values fell -3.8 percent between June 2022 and September 2023. Since then, Canberra rents have risen 3.5 percent, and are 1 percent from the record high.”

The Productivity Commission’s review of the National Housing and Homelessness Agreement points out that high-income earners also have more capacity to relocate to cheaper markets when rents rise, which creates more competition for lower-income households competing for homes in those same areas.

ANZ CoreLogic notes that rents in lower-cost markets have risen the most in recent years, so much so that the portion of earnings that lower-income households have to dedicate to rent has reached a record high 54.3 percent. For middle-income households, it’s 32.2 percent and for high-income households, it’s just 22.9 percent. ‘Housing stress’ has long been defined as requiring more than 30 percent of income to put a roof over your head.

While some high-income households may aspire to own their own homes, rising property values have made that a difficult and long process given the years it takes to save a deposit. ANZ CoreLogic data shows it now takes a median 10.1 years in the capital cities and 9.9 years in regional areas to save a 20 percent deposit to buy a property.

It also takes 48.3 percent of income in the cities and 47.1 percent in the regions to cover mortgage repayments at today’s home loan interest rates, which is far greater than the portion of income required to service rents at a median 30.4 percent in cities and 33.3 percent in the regions.