Australia’s latest inflation figures suggest things might be stabilising a bit, but for first-home buyers, the situation still feels quite complicated. February’s CPI was at 3.7%, with the trimmed mean inflation at 3.3%, both coming in lower than expected. At first glance, it looks like inflation is easing up. But keep in mind, this data was collected before recent global shocks hit the scene. Since then, oil prices have jumped about 50%, supply chain issues have popped up again, and cost pressures are mounting once more. So, the real inflation trend is still unfolding.
“Interest rates are determined by future inflation expectations, not last month’s figures. Currently, these expectations are influenced by geopolitical risk, conflict, and oil prices, which are the biggest uncertainties. Changes in oil prices affect everything—from transportation and construction to food and household budgets. This is why borrowers shouldn’t depend on past data. Lenders and the Reserve Bank are already focusing on future risks and opportunities.” Spiro Kolokithas What If We Finance.
The Reality Borrowers Are Missing
Inflation statistics are based on past data, but when it comes to lending decisions, lenders are looking ahead to future risks. Melbourne mortgage broker Spiro Kolokithas points out that lenders prioritize upcoming risks over historical figures.
Keep in mind that borrowing capacity can change weekly, sometimes dropping by 5% to 10%, depending on the individual client’s profile. A 0.25% interest rate rise and a drop in borrowing capacity anywhere between 15 and $30,000, depending on the client.
“We are already observing borrowing capacity change weekly. Lenders are adapting to future risks rather than relying on past data, which is surprising many first-time homebuyers.” – Spiro Kolokithas
Why First Home Buyers Feel It First
First-time home buyers often feel the impact of changes in borrowing capacity, living expenses, and lender policies more strongly. Even small adjustments can make the difference between getting approved and missing out on their dream home.
Do Not Play Interest Rate Bingo
Trying to predict rate movements is not a strategy.
Successful clients are those who stay well-organized and ready to take action. While you can’t control where interest rates are headed, you can manage your borrowing costs and budget, which is exactly where a skilled mortgage broker makes a difference. That’s why it’s better to focus on your financial plan rather than trying to chase interest rate changes. Attempting to predict interest rate movements is just like gambling, and it’s best to approach it with a sensible plan.
What Is Changing Right Now
Lenders are taking a fresh look at risk, and as living expense benchmarks go up, borrowing capacity is becoming more flexible. Using the wrong strategy could end up costing you a lot of money and stop you from buying your dream home. As differences between lenders grow wider, having a good broker strategy becomes even more important.
Strategy Creates Opportunity
Prepared buyers are still in a good position, especially now when there’s less competition in certain areas of the market. Getting pre-approval is important and is often quick, sometimes within just a few hours, and it usually remains valid for 90 days.
What Should You Do Now?
Take the time to understand and maximise your borrowing capacity and explore different lender options. Building buffers and securing pre-approval can give you peace of mind and protect your borrowing capacity and HU against potential interest rate rises. Being prepared helps you feel more in control, especially in uncertain markets.
Final Word
The biggest mistake is relying on outdated data. Remember, those who are prepared have the advantage over those waiting for certainty. Feel free to reach out to What If We Finance to learn more. We’re here to help you make informed decisions!
FAQs
Is inflation actually coming down?
It appears to be easing, but recent global events are not yet reflected in the data.
Will interest rates rise again?
There remains a strong possibility of further increases depending on upcoming data.
Should I wait before buying?
Waiting can reduce borrowing capacity and increase competition later.
How does inflation affect borrowing capacity?
Higher living costs reduce how much you can borrow and increase lender caution.
How long does pre-approval last?
Typically, around 90 days.
Why use a mortgage broker?
A broker compares multiple lenders to improve approval outcomes and structure.
