Soaring interest rates have been strangling the hopes many home seekers had of getting into the market.
A buyer who qualified for a $750,000 loan earlier this year would only be able to borrow $587,000. Someone who could have borrowed $500,000, will only get $391,000. Housing experts said the issue was arising because recent falls in home prices were not large enough to offset buyers’ lowered borrowing capacity.
He added that each 0.5 per cent raise in the cash rate has translated to about a 5 per cent drop in buyers’ borrowing capacity.Mortgage Choice broker James Algar said buyers who last year got pre-approval for loans that later expired were often shocked to discover how much their loan options had depleted.
Buyers who qualified for bigger loans earlier this year will see the most dramatic drops in their borrowing capacity, according to PropTrack.
“People realise we live in a world where rates aren’t staying low. Covid made people forget that,” he said, adding that more buyers were prepared to settle for smaller homes. 😂😂😂 was it Covid?
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