Rate cut could trigger buying boom

The spring property market is shaping up to be a scorcher, with new data revealing a surge in home loan pre-approvals as buyers scramble to get ahead of the competition.

Loan Market has reported a massive 53 per cent jump in pre-approvals during July compared to last year, indicating a rush to secure finance amid dwindling housing stock and improving borrowing conditions.

Across the states, SA and the NT are leading the charge with pre-approvals up 80 per cent.

In WA, pre-approvals are up 79 per cent and 49 per cent in NSW and the ACT.

Queensland records pre-approval rates of 48 per cent, while 46 per cent of homeowners in VIC and TAS are ahead of the game.

The spike comes amid tighter stock levels.

Ray White data shows new listings are down 14.2 per cent compared to this time last year, adding pressure to an already competitive market.

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Loan Market chief executive David McQueen.

David McQueen, CEO of Loan Market, expects pre-approvals to climb even further in the weeks leading into spring selling season if the Reserve Bank of Australia cuts the cash rate on Tuesday.

It would mark the third cut in five Monetary Board meetings.

“Market listings are at a three-year low, making it a tough environment for buyers,” McQueen said.

“Market listings are sitting at a three-year low, which is making it tough for buyers.

“They’re looking for every edge and that starts with knowing exactly what they can borrow and afford to repay.

“Buyers want to walk into an auction with confidence or put forward strong private treaty terms that help them stand out.”

If the RBA drops the cash rate by 0.25 percentage points, a buyer earning $120,000 a year could see their borrowing capacity increase by around $42,000 compared to the start of the year.

Reserve Bank Governor Michele Bullock addresses the media in Sydney. Picture: Christian Gilles / NewsWire

Underlying inflation has already dropped to 2.7 per cent in the 12 months to the June Quarter, down from 2.9 per cent in the March Quarter.

“Inflation is heading in the right direction which has raised hopes of an August rate cut,” Mr McQueen said.

“We’re expecting a rush of inquiries from buyers if the RBA follows market expectations.

“It will also bring more relief for mortgage holders who have been diligently meeting repayments while rates have been high.”

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