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Pre-approval rates are climbing as interest rates ease, according to brokerage Loan Market.
Buyers have responded to improved affordability in the wake of lower interest rates, with finance brokerage Loan Market reporting a 53 per cent year-on-year increase in pre-approval numbers following cuts this year.
In the month following the Reserve Bank of Australia’s (RBA’s) February cash rate cut, Loan Market’s pre-approvals were 43 per cent higher year on year; following the May cut, pre-approvals rose 53 per cent higher than the comparable month in 2024.
The rise in pre-approvals is being seen across Australia, with Victoria posting the highest year-on-year uplift after the May rate cut, a 117 per cent jump.
Elsewhere, pre-approval rates rose 52 per cent in Queensland, 36 per cent in NSW, 60 per cent in South Australia, and 9 per cent in Western Australia.
According to the brokerage, the trend in rising loan demand is being driven by the cheaper cost of borrowing.
Since the start of the year, a customer earning $120,000 a year has had their borrowing capacity increase by $27,000, Loan Market data shows.
Should there be another 25 basis point cash rate cut, this would increase to $42,000.
With expectations that the central bank will reduce the cash rate again on Tuesday (8 July), more buyers are likely to position themselves to buy within the property market, according to the brokerage.
David McQueen, CEO of Loan Market, noted that the borrowers are capitalising on the long-awaited rate easing cycle.
“Customers stood on the sidelines for the last four years as we endured the highest interest rates in a decade.
“The cash rate has dropped 0.5 percentage points in the last five months, which has been the news people trying to upgrade or enter the market have been waiting for. Predictions of further rate cuts by the RBA will bring more buyers to the market,” he said.
“The second cash rate cut was important in the eyes of borrowers. It gives consumers confidence that rates are heading in the right direction, improving affordability.”
However, McQueen warned that supply-side pressures could present issues for prospective home buyers, including dwindling supply and rising prices.
“The challenge for buyers, at the moment, is the lack of properties for sale,” McQueen said.
Melbourne-based Loan Market broker Jacob Decru highlighted that there had been a pick-up in pre-approval activity in the weeks leading up to the first rate cut in February. “Buyer sentiment has since improved quarter on quarter,” Decru said.
“With talk that there are more cuts on the way, FOMO (fear of missing out) is building.
“Owner-occupiers in Melbourne feel the market has bottomed out and further interest rate cuts are going to lift prices.
“There are more buyers wanting to purchase now, but fewer properties on the market compared to last year. Sellers may be waiting until spring to list, but there are buyers wanting to purchase now.”
LMG lender panel hits century milestone
Loan Market Group (LMG) has been evolving its options for borrowers seeking pre-approvals, including by expanding its lender panel.
The wholesale aggregation arm LMG recently announced that its panel across residential, asset and commercial lending has now grown to more than 100 lenders, after it welcomed specialist lender MA Money.
Commenting on the milestone, Ewen Stafford, executive director and CEO of LMG, said MA Money was a welcome addition for brokers.
“With the addition of MA Money, we now have 63 residential, 34 asset and 33 commercial finance-focused lenders on panel, giving brokers the solutions to handle the spectrum of client needs and scenarios,” Stafford said.
“It’s not just a bigger panel, it’s a broader one. Whether brokers are writing a first home loan, funding business growth, or helping a client buy a truck, the options are there. That’s how we’re backing diversified broker businesses.”
Gabrielle Aoun, head of partnerships at MA Money, said: “Joining the LMG panel is an exciting moment for us. We’re here to help brokers deliver great results for their clients – fast answers, flexible solutions and a real understanding of what makes a deal work.”
LMG’s push to expand its now 100-strong lender panel stands in contrast to the recent trend of some aggregators removing lenders from their panels.
[Related: Home values keep climbing amid easing rates]
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