Some potential homebuyers with financial pre-approval are caught off guard by rising interest rates after learning that their borrowing capacity may have changed.
Preliminary loan agreements quickly become obsolete and many people are unable to borrow as much as they originally thought.
ICU Financial Group Director Arlton D’Souza told NCA NewsWire that getting pre-approved is always a big step for house hunters.
“As interest rates have risen dramatically over the past five months, getting pre-approved is very important, especially for first-time home buyers, as the appraisal rate for each bank has also increased,” he said.
“On average, that’s about 3% above the quoted rate, which could kick a lot of first-time home buyers out of the market.”
Mr D’Souza said there were some things people could do if they were concerned about rising interest rates.
“They should go back to their existing brokers and review what they were asking for initially, because the overall borrowing capacity might have diminished somewhat,” he said.
“They may also be able to borrow more from one lender as opposed to their initial pre-approval with their first lender.”
It comes after the Reserve Bank of Australia raised the official exchange rate by 0.50% this month to 2.35% – the fifth consecutive rate hike.
The big four banks have raised their interest rates, as have some other lenders.
“I know a lot of consumers would love to enter the real estate market, but they should think long and hard before they pressure themselves and expand into what they can and can’t afford,” D’Souza said.
“For example, my mortgage payments have gone up by $1,000 since the rates started going up.
“A lot of consumers would be hurting right now with the recent rate hikes and we could probably expect a few more for inflation to ease.”
Originally published as Another sharp twist for first-time homebuyers grappling with rising interest rates