If you were told a lending amount six or twelve months ago and you are wondering whether it still stands, the short answer is that it probably does not. It may well have moved in your favour.
This comes up constantly. Someone was approved for a certain amount, life carried on, and now they are looking at a bigger place, a renovation, or helping a child into their first home, and they want to know whether the old number is still good. It is a sensible question, and here is what sits behind it.
Your number was a snapshot, not a standing offer
A borrowing figure is the output of your circumstances, the bank's policies, and interest rates on the day it was calculated. All three of those move.
Pre-approvals typically run for around three months for exactly this reason. It is not the bank being awkward, it is an acknowledgement that the assessment has a shelf life.
What moves it, in rough order of impact
Interest rates. Banks assess your affordability at a rate above the one you would actually pay, usually around two percent above the current two year fixed rate. When interest rates fall, that test rate falls with them, and your borrowing capacity rises without you doing anything. When rates climb, the reverse happens. This is the single biggest reason a number changes when nothing about your household has.
Your income, and how it is made up. A pay rise helps, obviously. But the composition matters as much as the total. A shift from salary to contracting, or a larger share of your income coming from overtime, commission or bonus, can reduce what the bank will count even if your gross figure went up. Self-employed income is assessed off your financials, so a strong year or a weak year in the accounts moves things noticeably.
Debt you have picked up without really noticing. A new car on finance, a credit card limit increase you accepted when the bank offered it, a buy now pay later account. Remember that cards count on the limit rather than the balance, so an unused limit still costs you.
Bank policy. Banks quietly adjust their living cost assumptions, how they treat various income types, and their appetite for certain lending. These changes are not announced publicly often and they are part of why the same application can get materially different answers from different banks, and from the same bank at different times.
The debt to income limit. Since July 2024 there has been a restriction on how much lending banks can write above six times gross income for owner-occupiers. If you are up near that mark, income growth matters more than usual, because it lifts the ceiling as well as the affordability. Worth noting that refinancing without increasing your total debt can be treated differently, so if you are simply moving banks rather than borrowing more, ask about it rather than assuming you are capped.
Your equity. For anything involving your existing property, what the bank thinks your home is worth is a live input. Values move, and the figure the bank is using may be out of date or simply lower than you expect. That is worth checking before you plan around it, and often you can see the bank's own estimate in your banking app.
Rates cutting both ways
The point about test rates is worth sitting with, because it works in both directions and most people only hear about it in one.
If you were assessed when rates were higher and they have since come down, your capacity has likely improved, possibly by a lot. Plenty of people who were told no eighteen months ago would get a different answer now, and they have no idea, because nobody went back and told them.
If you were assessed when rates were lower, the opposite may be true, and it is better to know that before you put an offer in on a house or bid at an auction.
The practical bit
If you are thinking about anything that needs more lending in the next year, it takes very little effort to get your number refreshed. Send through your current income details, any new debts or credit limits, and a note of anything that has changed at home, and we can rerun it across the banks.
Two things worth doing before you commit to a plan. Check what value the bank is using for your property, and take a look at your credit card and other limits, because tidying up the ones you do not use is often the quickest win available.
Wondering if your borrowing capacity has changed?
Get in touch with Greg today or book a call in his calendar below to get a refreshed, personalised assessment across the banks.
