Rate cuts trigger biggest home loan boom since Covid

2 days ago 12

The Time to Buy A Dwelling Index has taken off in the midst of three rate cuts, with preapproval applications surging. Picture: Jeremy Piper

Three rate cuts have supercharged buyers, swarming banks in the biggest rush for home loans since the pandemic amid growing fears of a new property boom.

After three 0.25 percentage point variable rate cuts in 2025 – and more expected – Aussie homebuyers are flooding banks to secure preapprovals, hoping to get into the market before property prices start to surge again.

The rate cuts’ boost to buying power has been so dramatic that someone with a combined household income of $200,000 can now qualify to borrow over $1 million, a threshold that was out of reach just months ago.

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New housing development, building new houses in suburb, Sydney, Australia, aerial photography

CommBank says the rate cuts have lifted borrowing capacity by 7 per cent.

New CommBank data reveals the first two cuts alone sparked a 12 per cent jump in conditional home loan preapprovals, with the average amount people are applying to borrow up 13 per cent.

CommBank says the rate cuts have lifted borrowing capacity by around 7 per cent, sparking renewed activity from first home buyers, investors and upgraders alike.

The data coincides with PRD Nationwide’s Time to Buy a Dwelling Index, which jumped 37 per cent nationally in the year to August – the biggest rise since before the Reserve Bank began raising rates in May 2022.

PRD chief economist Dr Diaswati Mardiasmo said “buyers are back. Like, properly back, not cautiously back, more like gung-ho back”.

She expects rising demand to push markets to their highest levels since the pre-rate hike boom, especially in Queensland, New South Wales, Western Australia and Tasmania.

“With the third cash rate cut happening earlier this month and banks passing it on, we should see shorter days on market, higher auction activity, more first home buyers.”

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PRD chief economist Dr Diaswati “Asti” Mardiasmo.

Some of the most eye-popping results came out of Tasmania where the Time to Buy a Dwelling Index skyrocketed 113.5 per cent year-on-year, though Dr Mardiasmo warned it was a volatile market prone to a “push pull dynamic”.

Western Australia hit its highest level since November 2021, she said, up 39.2 per cent to 102.1 index points in August 2025. “This suggests price growth is imminent.”

Sydney spiked 46.5 per cent to hit 100 points, Brisbane was up by 34.5 per cent to 97.1 points, its highest level since January 2022, and Melbourne grew 24.3 per cent to 103.2 points.

The “biggest surprise”, she said, was South Australia, which grew only 4.3 per cent to 79.3 index points. “This creates a unique opportunity for first home buyers and investors.”

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CommBank says preapproval takes 10 minutes online and customers are feeling confident enough to do it.

CommBank data shows first homebuyer confidence is high among pre-approvals statistics, with the average amount they’re applying to borrow now sitting at $546,000 – an 11 per cent increase compared to last year.

New South Wales househunters have seen the biggest spike with a 25 per cent increase in preapprovals, followed by Queenslanders with a 16 per cent rise while Victoria is still holding steady.

CommBank Executive GM Home Buying, Marcos Meneguzzi said more people are now “feeling confident about their home buying options”.

“The Aussie dream has long been anchored in home ownership, and this rise in conditional pre-approval activity reflects a renewed sense of optimism as borrowers respond to lower interest rates and increased borrowing power,” he said.

Affordability will be the next big issue for homebuyers and sellers. Picture: Rohan Kelly

Dr Mardiasmo said the danger zone would be affordability for many Australians now.

“Already we have higher debt levels compared to five and 10 years ago,” she said, adding “more demand and higher prices suggest that debt levels will go even higher.”

“Buyers will need to either widen their search – that is, outside their most desirable or “best scenarios” areas/suburbs, and consider others. Or if not possible, consider other types of stock – from houses to townhouses to units. Yes unit pricing is growing rapidly, but compared to house prices you are still looking at approximately 30-35 per cent cheaper right now.”

CommBank said conditional preapprovals take just 10 minutes to apply for online, or buyers can choose to speak directly with a home lending specialist, adding applications can be tracked in real time, and are valid for 90 days with easy renewal options.