New brutal twist for first-home buyers struggling with interest rate rises

House hunters have been dealt a new blow as interest rates continue to climb at a terrifying pace.

Some prospective home buyers with finance pre-approval are being caught out by rising interest rates after learning their borrowing capacity might have changed.

The preliminary loan deals are quickly becoming out-of-date and many people are not able to borrow as much as they originally thought.

ICU Finance Group director Arlton D’Souza told NCA NewsWire getting pre-approval was still an important step for house hunters.

“Since the interest rates have gone up considerably over the past five months, it is very important to get a pre-approval, especially first-home buyers, as the assessment rate for each bank has also risen,” he said.

“On average, it’s about three per cent above the rate quoted, which could throw a lot of first-home buyers out of the market.”

House hunters with finance pre-approval are getting caught out by rising interest rates. Picture: Gaye Gerard / NCA Newswire

Mr D’Souza said there were some things people could do if they were concerned about rising interest rates.

“They should go back to their existing brokers and revisit what they were initially applying for because the overall borrowing capacity could have decreased somewhat,” he said.

“They may also be able to borrow more from one lender as opposed to their initial pre-approval with their first lender.”

It comes after the Reserve Bank of Australia lifted the official cash rate by 0.50 per cent this month to 2.35 per cent – the fifth consecutive rate rise.

The Reserve Bank of Australia lifted the official cash rate by 0.50 per cent this month to 2.35 per cent. Picture: iStock

All four major banks have increased their interest rates, as have some other lenders.

“I know a lot of consumers would like to get into the property market, but they should think long and hard about putting pressure on themselves and over extending what they can and can’t afford,” Mr D’Souza said.

“An example of this is my mortgage repayments have risen $1000 since rates started going up.

“A lot of consumers would be hurting at the moment with the recent rate rises and we could probably expect a few more so that inflation slows.”

Originally published as New brutal twist for first-home buyers struggling with interest rate rises