Brokers see surge in pre-approvals as home-buying confidence rises

While RBA members have poured cool water on the prospect of multiple further reductions in the cash rate target at subsequent meetings, home-buying sentiment is rising, with borrowers moving quickly to access lower rates.

Aggregation group Connective has reported that over a quarter (27 per cent) of all loan applications in February were for pre-approvals – the largest proportion since February 2021. Indeed, pre-approval volumes were up 30 per cent on 2024 figures and 50 per cent up from February 2023.

Connective added that the value of pre-approvals also rose markedly, up 30 per cent in February 2025 (compared to 21 per cent at the same time last year).

Similarly, finance brokerage Loan Market has revealed that it saw a 30 per cent rise in pre-approval lodgements at the start of 2025 (when compared to the same period in 2024), with Loan Market’s January pre-approvals jumping 46 per cent year on year, followed by an 18 per cent increase in February.

Connective CEO Glenn Lees said the lead indicators suggested that more borrowers are entering the market and signal growing confidence in the lending market. He continued that while the pre-approval data was “a statement of intent” (as there is no guarantee that all the pre-approved applications will convert into settlements), it shows that people may be more forward-looking, possibly anticipating further rate cuts and, therefore, seeking indicative approvals to be in a position to take action in the future.

“We know there’s a degree of seasonality at play with the data, as February historically tends to be a peak month as people consider buying after a slower December and January. However, this February stands out as the highest proportion of pre-approvals we’ve seen in years, certainly since 2021, which was when the world opened up again post-COVID,” Lees said.

“Our pre-approval data indicates that borrowers’ appetite to jump into the property market is increasing, and the recent rate cut is likely to fuel that further. But the reality is more nuanced; increased demand will inevitably increase property prices. Overlay the pressures of a cost-of-living crisis on household budgets and it could remain just as difficult for many home buyers to get pre-approval,” Lees said.

“The best brokers will continue to be relied on as trusted advisers for their clients, and we want to support our brokers with the insights and tools to help them connect with their clients at the right time with the most relevant and valuable information.”

Lees added: “[B]rokers have a great opportunity to add value to clients that is deeper than finding the best rate. The market might be warming up, confidence might be growing, but the lending landscape remains complex, and brokers who understand their clients’ financial goals and can help them navigate the landscape will be successful.”

David McQueen, CEO of Loan Market, said the spike in activity in early 2025 reflected confidence among buyers that the cash rate had peaked.

However, McQueen said the surge in pre-approvals may be down to confidence in rate stability rather than more than borrowing power.

“Borrowers can now see a ceiling in their repayments and have more confidence in their real estate hunts,” McQueen said.

He echoed concerns that previous rate cuts have resulted in increasing house prices.

For example, he cited real estate network Ray White data that shows that, since 2011, whenever the central bank has reduced the cash rate following a prolonged period of no rate movements (six months or more), house prices in Sydney and Melbourne increased by an average of 1 per cent the following month.

“If someone is wanting to buy soon, they’re best to understand how much they can borrow and get their loan pre-approved with their broker,” he said.

According to Home Loan Experts broker Sid (Siddhartha) Bajracharya, borrowers are increasingly coming into market amid concerns that they may be priced out if home prices rise further.

He said: “A few clients seem to be in a rush to buy properties though, speculating that they cannot afford it if they wait any longer; two of my clients who were already pre-approved showed some urgency about getting into the market.”

Similarly, senior mortgage broker Jonathan Preston noted that Melbourne (which had seen subdued activity in 2024) was “on the move”, with multiple borrowers believing they had “missed” the bottom of the Melbourne market and stating that properties that they had been looking at had sold quickly.

He added there was renewed interest in buying “large, Sydney multimillion-dollar properties”.

“People have been asking me to work out how much income they need to get these $4 million houses,” he said.

Home-buying sentiment rises

The growing pre-approval activity comes as consumer sentiment increases – particularly around home buying.

The Westpac–Melbourne Institute Consumer Sentiment Index, released this week, reported a 4 per cent rise in March, lifting to 95.9 from 92.2 in February (partly attributed to the rate cut and a further easing in cost-of-living pressures).

In particular, the “time to buy a dwelling” index increased by 4.3 per cent to reach 91.6. While pessimists still outnumber optimists, this marked the lowest level of pessimism since September 2021, Westpac noted.

The interest rate cuts had a particularly positive impact in Victoria, where buyer sentiment surged by 15.3 per cent, reaching outright optimism at 106.

Western Australia also saw a strong rebound in buyer sentiment, rising by 24.6 per cent to 89.4, recovering from last month’s extreme lows, the index found.

Although outright optimism remains limited, there are now six subgroups with a positive outlook on the “time to buy” measure, including 18- to 24-year-olds and home owners without a mortgage.

Consumers also now hold a more confident outlook on house prices.

The Westpac–Melbourne Institute Index of House Price Expectations climbed by 2.9 per cent to 146.5 in March, reflecting a nearly 10 per cent rebound from its January low.

However, consumers are not as optimistic as they were last year, with 59 per cent now expecting prices to rise in the coming year, up from 53 per cent two months ago (but still below the peak of over 70 per cent recorded in June 2024).

Westpac’s recent Housing Pulse report for March 2025 outlined, however, that gains are expected to “remain limited” due to already high property prices and affordability constraints.

Data from analytics company CoreLogic also this week indicated a small rise in prices throughout February (0.3 per cent), with notable turnarounds in Sydney and Melbourne, where small declines had previously been observed.

High-end markets showed strong growth in February, which CoreLogic suggested may be due to the fact that they “generally need more finance to buy into them”, so cash rate reductions result in “a stronger response” in these markets.

CoreLogic economist Kaytlin Ezzy said: “In Sydney and Melbourne, but also Hobart, many of the markets with a solid response to rate reductions are also seeing values well below their peak under recent interest rate rises, so easier access to credit may trigger a recovery trend in these markets.”

Ezzy commented that overall, the market has had a strong response to the February rate cut, with the daily trend showing a material improvement in the Home Value Index prior to the cut.

“This suggests sentiment was also at play,” she said.

“If buyers are out in market expecting they can access more finance, this may have contributed to a strong market response.”

[Related: Rate cut leaves housing market in delicate balance]