Could your home loan pre-approval be out of date?

Having loan pre-approval can be a smart move for home buyers. But the recent Reserve Bank cash rate hikes could leave your pre-approval in need of an update.

There’s a lot to love about home loan pre-approval.

It shows how much a bank will let you borrow for a home – that’s your ‘borrowing power’.

Pre-approval also indicates you’re a serious buyer, providing extra bargaining clout in price negotiations.

And while pre-approval typically only lasts for three to six months, that can be sufficient time for many buyers to find their ideal home.

But there’s a catch.

Pre-approval is not a guarantee. Rather, it is a guide of what you can borrow based on circumstances at the time pre-approval was issued.

And the two rate cash rate hikes the Reserve Bank of Australia has implemented this year may have chipped away at your borrowing power.

That can make it worth reviewing your mortgage pre-approval.

Here’s what to weigh up.

Your borrowing power may have altered

Your borrowing power, also known as ‘borrowing capacity’, is a key factor when it comes to buying a home.

It’s the amount a bank is willing to lend for a home loan, and it’s based chiefly on your income and living expenses.

However, interest rates also play a role.

A rise in interest rates will mean higher repayments, and this has the potential to reduce your borrowing power.

As an example, Canstar says a solo home buyer on the average full-time wage ($106,950) will be able to borrow around $12,000 less as a result of the March 2026 rate rise.

Add in the 0.25% February rate hike, and that same home buyer could be looking at a $25,000 cut to their borrowing power.

A couple on the average wage may have seen their combined borrowing power drop by $49,000 since February.

That’s why it’s so important to call us to understand your true borrowing power as it currently stands.

Yes, there are online calculators available. But these may not consider every aspect of your personal situation.

The risk of outdated pre-approval

Taking a ‘she’ll be right’ approach to your loan pre-approval could work against you.

You may find, for example, that after negotiating a great price on a place you’re keen to buy, you struggle to get the home loan you need.

Worst case scenario: you risk being the winning bidder at auction but failing to get finance to complete the purchase – a situation that could mean losing your deposit.

Here too, a call to us can confirm if you are good to go for a home loan before you start putting money on the table for a property purchase. 

How to boost your borrowing power

The good news is that there are steps you can take to potentially boost your borrowing power – no matter what interest rates are doing.

Here are a few ideas to get started.

Review household expenses – even a small change in non-essential spending can make a difference.

Lower the limit on your credit card – lenders often base your borrowing power on the assumption your credit card is maxed out. Think about asking your card issuer to trim your credit limit. Or close it altogether.

Clear other debts – a lingering car loan, the remains of student debt, and even an ongoing buy now, pay later balance can impact your borrowing power. Knuckling down to clear the slate could see you rewarded with increased borrowing capacity. 

Know that rate matters – the rate you pay isn’t the sole decider of whether a loan is a good match for your needs. But the lower the rate, the more you may be able to borrow.

Talk to us for up-to-date loan pre-approval

Successful home buying doesn’t have to mean borrowing as much as you can. 

However, it makes sense to start the ball rolling with a clear idea of your current borrowing power.

Talk to us to know if your loan pre-approval is out of date, or to organise new pre-approval on a loan that’s well-matched to your needs.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.