Buyers have responded to improved affordability with leading finance brokerage Loan Market reporting a 53% year-on-year increase in pre-approval numbers following interest rate cuts.
With expectations the Reserve Bank of Australia will reduce the official cash rate again on Tuesday, more buyers will position themselves to buy within the undersupplied property market, according to the brokerage.
In the month after the RBA’s May meeting, pre-approvals ticked-up in line with customers’ borrowing capacity. Since the start of the year, a customer earning $120,000 per year has had their borrowing capacity increase by $27,000. If there is another cash rate cut of .25 percentage points, this would increase to $42,000.
“Customers stood on the sidelines for the last four years as we endured the highest interest rates in a decade,” said David McQueen, CEO of Loan Market.
“The cash rate has dropped .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.
“The challenge for buyers, at the moment, is the lack of properties for sale.”
According to Ray White, Australia’s largest real estate network, new property listings in May were 11.8% down across the country compared to the same month last year.
In the month following the RBA’s February cash rate cut, Loan Market’s pre-approvals were 43% higher than the same period last year; following the May cut, pre-approvals rose 53% higher than the comparable month in 2024.
Across Australia, Victoria posted the highest year-on-year uplift in pre-approvals after the May rate cut – a 117% increase. Elsewhere, there were increases in:
▪️Queensland – 52%
▪️NSW – 36%
▪️South Australia – 60%
▪️WA – 9%
Melbourne-based Loan Market broker Jacob Decru noted 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.”
McQueen added: “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.”
McQueen said it was important for borrowers to engage a broker to learn which lenders were passing on the rate cuts in full.
