As interest rates continue their downward trend, a familiar pattern is beginning to re-emerge in the property market.
Mortgage brokers are reporting that a growing number of buyers are once again looking to borrow to their maximum capacity — a notable shift in sentiment from the more cautious behaviour seen during the rate-hiking cycle.
With the Reserve Bank recently cutting the cash rate to 3.85%, confidence appears to be returning to the market.
“People are generally still borrowing the maximum they possibly can,” said Theo Chambers, CEO of Shore Financial. “They’re pricing in future rate cuts – while they can’t use that to increase their capacity at the time of purchase, they can stretch themselves to the maximum.”
This shift in mindset comes with increased risk. During the height of the low-rate environment, nearly a quarter of new borrowers took on debts six times their incomes. While that figure fell to just 5% mid-last year, the trend is starting to creep upward again.
Brokers are urging caution. Stretching to the limit may leave buyers vulnerable if the unexpected happens — whether it’s a job loss, a drop in sale price, or future changes in household expenses.
Sally Tindall from Canstar reminds borrowers: “Don’t rely on your bank to tell you how much you can borrow. That’s how people got into hot water back when rates were at record lows.”
While declining interest rates may increase borrowing capacity, the real barrier for many remains the deposit. As ANZ’s Adelaide Timbrell notes: “We are in an environment where housing is so unaffordable that getting that deposit is really difficult no matter what interest rates are doing.”
The takeaway? Now more than ever, strategic planning and financial discipline are key — even in a market that’s beginning to favour buyers again.
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