Rapid rate hikes are rendering home loan pre-approvals unreliable, brokers have warned, leaving more buyers exposed at auction.
Brokers have reported that an increasing number of borrowers are discovering their pre-approval limits no longer stack up once lenders reassess applications at higher interest rates.
Alex Veljancevski, mortgage broker and founder of Eventus Financial, said more property hunters were making offers based on figures that no longer reflected their true borrowing capacity.
“A pre-approval is a snapshot in time, not a guarantee,” he said.
“It’s based on your income, expenses, and the interest rate environment at the moment it was issued. When rates move, that figure moves with them, but many buyers don’t realise that until it’s too late.”
Veljancevski said those shifts were not always front of mind for borrowers.
“I’m seeing buyers who went through the pre-approval process late last year or early 2026 and are still treating that figure as current. They’ve found a property, and they’re ready to bid, but they haven’t stopped to check whether their position has changed,” he said.
The warning comes after the Reserve Bank of Australia lifted the cash rate to 4.1 per cent at its March meeting, marking a second consecutive 25-basis-point increase this year.
The RBA has also signalled further tightening may be needed to contain inflation pressures, with all four major banks predicting another 0.25 per cent hike in May.
Cotality estimates that every 0.25 percentage point hike trims the borrowing capacity of a median‑income household by almost $18,000.
Veljancevski said the danger point was when buyers relied on an outdated pre-approval to set their maximum price.
“When a buyer wins at auction, the lender reassesses income, expenses, liabilities and applies current interest rate buffers, and if rates have risen, the approved loan amount can come in lower than expected,” he said.
“This can leave buyers scrambling to bridge a shortfall or, in some cases, unable to proceed with the purchase at all.”
90‑day windows and lender inconsistency
Veljancevski also highlighted the 90‑day validity period many lenders attached to pre‑approvals – but said the reality was more complex than borrowers often assumed.
He noted that a buyer who secured a pre‑approval before a rate increase and managed to transact within three months would usually be assessed on the original terms – but stressed not all institutions followed that pattern.
“The problem is that this is not consistent across all lenders. Some will reassess your borrowing capacity mid-approval period if rates move, even if you’re still within the 90 days,” he said.
“Once a pre-approval expires, you’re reassessed from scratch under current conditions regardless. Buyers need to understand exactly where they stand with their specific lender, and that’s not something you can find on a website.”
Greg Bishop, senior credit adviser at Shore Financial and winner of the 2026 Better Business Award for Best Customer Service, said he was also seeing more pre‑approvals go stale before a client secured a property.
“It’s increasingly common in the current environment, driven by higher volumes and longer buying timelines,” Bishop said.
“We’re also seeing more clients seek pre-approval earlier in their journey, often before they’ve identified a property, which naturally increases the likelihood of approvals expiring before a purchase is made.”
How brokers are trying to de‑risk deals
Bishop said he had not seen transactions collapse due to rate‑driven risks, as his team had built his processes around that risk.
“Our process is designed to mitigate that risk; we prioritise lenders who will honour a 90-day pre-approval regardless of rate movements,” he said.
He added that conversations around affordability now routinely extend beyond current pricing to stress‑testing for further hikes.
“We focus on securing pre-approvals with lenders that will honour the assessment rate for 90 days. Beyond that, we’re having more proactive conversations around affordability, including modelling repayments under potential rate increases,” Bishop outlined.
Bishop said the majority of inconsistency in lender behaviour tended to arise from how different institutions treated less predictable income streams.
“The key variables tend to be income types – such as commission, overtime, or rental income, which can shift,” he noted.
“We place strong emphasis on educating clients about these sensitivities and, where relevant, recommend contract terms to allow time to reconfirm and secure formal approval.”
Call for fully assessed, time‑bound approvals
Looking ahead, Bishop said he believed there was a strong case for lenders to be required to stand behind their pre-approvals for a clearly defined period.
“Yes, I believe they should,” he said when asked whether pre-approvals should be honoured regardless of rate changes for a set time frame.
“Lenders already build in a buffer, typically around 3 per cent, to account for rate increases. Honouring pre-approvals within a defined period reduces uncertainty and risk for clients, which is critical in maintaining confidence through the process.”
March Cotality data showed that the combined capital city clearance rates were stuck below 60 per cent for a third consecutive week, with about 19 per cent of auctions withdrawn from sale nationally and 26.7 per cent withdrawn in Sydney alone.
[Related: Market shifts forcing deposit scheme users to compromise]
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