Four Rate Rises Have Turned an $800,000 Borrowing Limit Into About $720,000. Eventus Financial’s Alex Veljancevski on the Pre-Approval Trap

Featuring Alex Veljancevski, Founder, Eventus Financial. Commentary drawn from the Eventus Financial / Hunter & Scribe media release on the cumulative impact of the 2026 rate rises on first home buyer borrowing power. Framed for mortgage brokers by The Broker Times.

The Reserve Bank has lifted the cash rate by another 0.25 percentage points to 4.60%, the fourth increase of 2026 and a full percentage point in total. Most of the coverage will be about repayments for existing borrowers. Mortgage broker Alex Veljancevski wants brokers looking at a different group: first home buyers whose finances have not changed at all, but whose borrowing limit has.

The client whose file did not change

Picture the first home buyer you pre-approved in January. Same job, same salary, same living expenses, same deposit sitting in the same account. On paper nothing about their file has moved. Their borrowing capacity has.

“First home buyers have now been hit with four rate rises since February. Even if their income, expenses and deposit haven’t changed, the maximum amount a lender is prepared to give them may have fallen considerably.”Alex Veljancevski, Founder, Eventus Financial

Veljancevski says four interest rate rises in 2026 could collectively cut tens of thousands of dollars from first home buyers’ borrowing capacity, potentially forcing some to lower their budgets or reconsider the type of property they can afford.

For brokers, that reframes the rate decision. The repayment conversation with existing clients matters, but the more time-sensitive one may be with clients who have not settled yet.

How big is the hit?

The release leans on the Reserve Bank’s own work. In a 2022 speech on interest rates and the property market, the RBA said a 50 basis point increase in the serviceability assessment rate reduced the maximum loan size by up to 5%. It also estimated that the 225 basis point increase in the cash rate during the 2022 cycle, once fully passed through to mortgage rates, would reduce maximum loan sizes by around 20%.

Taken together, the release suggests a one percentage point increase in mortgage rates could reduce maximum borrowing capacity by roughly 10% as a broad guide. It is careful to add that the actual impact will vary with a borrower’s income, expenses, existing debts and other circumstances, as well as individual lender rates and servicing policies.

Treat the 10% as a rule of thumb for the conversation, not a substitute for running the file. Your lender panel will not move in lockstep, and a client with other debts or dependants may land well away from the average.

Why the buffer multiplies the move

The mechanism is the serviceability test. As the release puts it, under APRA’s mortgage serviceability buffer lenders generally assess new borrowers at an interest rate at least three percentage points above the rate they would actually pay. When mortgage rates rise, the assessment rate generally rises with them, shrinking the loan a borrower can service even if nothing else has changed.

“That’s where the cumulative impact becomes much more significant. We’re no longer talking about one 25-basis-point increase. Four rate rises can add up to a substantial reduction in how much a first home buyer is able to borrow.”Alex Veljancevski

That is the part clients rarely see. They hear “a quarter of a per cent” four times and think in repayments. The lender is thinking in assessment rates, and the assessment rate has moved a full point since February.

Squeezed from both directions

Veljancevski adds a second pressure. He says changes to negative gearing could add another layer of competition at the more affordable end of the market. As the tax benefits of buying established investment properties are reduced, some investors may find their budgets constrained and focus increasingly on lower-priced properties where the numbers still stack up. That puts them in more direct competition with first home buyers, who are already concentrated in the entry-level segment.

“First home buyers could potentially be squeezed from both directions. Higher interest rates and servicing requirements may reduce how much they can borrow, while investors with tighter budgets may increasingly compete for the same lower-priced homes, apartments and townhouses. So a first home buyer with reduced borrowing capacity may not just have a smaller budget to work with. They may also have a smaller pool of suitable properties available within that budget.”Alex Veljancevski

If you write for both investors and first home buyers, you may be sitting on both sides of that squeeze. It is worth knowing which of your clients are chasing the same stock.

The search is already below the listings

The reduction lands on buyers who were already stretching. The release cites Domain’s Matching Demand report, which found the median search price for an outer-ring Sydney house was $1.1 million, against a median listing price of $1.28 million. That gap of around $177,000 was substantially larger than the equivalent gap in any other capital.

Domain also found affordability was increasingly shaping what buyers look for. In Sydney’s outer ring, median search prices were $900,000 for townhouses and $700,000 for units, against $1.1 million for houses.

“For some first home buyers, losing borrowing capacity means changing the property search altogether. They may have to consider a townhouse instead of a house, a unit instead of a townhouse or a different part of the city.”Alex Veljancevski

Veljancevski notes first home buyers may be particularly exposed because, unlike many existing owners, they generally do not have property equity to cushion a fall in borrowing capacity. There is no equity release or downsizing lever to pull.

The pre-approval trap

This is the practical sting. Veljancevski warns that a buyer’s maximum borrowing amount could be reassessed before final approval if interest rates or lender servicing policies change.

“A buyer who was pre-approved earlier this year shouldn’t assume that figure still applies after four rate rises. That becomes particularly important at auction, where the difference between the borrowing capacity you thought you had and what the lender will approve today could be tens of thousands of dollars.”Alex Veljancevski

Auction is where the risk becomes irreversible for the client. An unconditional contract signed against a stale pre-approval is the scenario every broker wants to prevent, and the only reliable prevention is a phone call before the bidding starts.

What to do with your pipeline this week

Sources: Eventus Financial / Hunter & Scribe media release, “Four rate rises could wipe tens of thousands from first home buyers’ borrowing power”, for all Alex Veljancevski quotations, the cash rate figures, the $800,000 worked example and the Domain figures; Reserve Bank of Australia, “Interest Rates and the Property Market”, speech, 19 September 2022, for the 5% and 20% loan-size estimates; Domain, Matching Demand report, as cited in the release.