What happens if interest rates rise between pre-approval and full approval?

Depends a bit on the the lender.

When APRA raised the min buffer from 2.5 to 3 % last year, some lenders came out with a set date that was shorter than their actual max pre approval period, eg CBA.

Further, if any material change occured for the pre approval, say a slightly higher loan amount, lvr or other thing and it had to go back to credit, a new assessment under the new rules was required.

If the application was tight on servicing that meant a no go with that lender

ta
rolf

 

Usually

ta
rolf

 

If you are concerned, pls check with broker/lender directly and if the response isnt clear, have a back up plan in place, making sure that the loan services and meets criteria elsewhere perhaps at an increased benchmark rate.

Im not saying run 2 apps, just saying have a Plan B if the answer from the lender isnt in writing

ta
rolf

 

History is no guide to the future, have even seen lenders pull formal approvals where they have worked out THEY made a mistake when they do QA AFTER formal approval and even docs issued...........

In a recent decent size loan we needed to get the thing booked in for settlement, but the loan was still with QA and wouldnt have the loan docs checked - strange process.

The longer the pre approval period the higher the risk, say CBA with 180 days, I have seen them formally pull back on that when we had some APRA changes last year, BUT they did provide adequate notice and for many that meant the pre app period went back to a max of 90 days.

Typically, I would say the larger lenders are better in this area in my experience than some of the smaller Mutuals and second tier banks, who may be less risk tolerant and are willing to take the market shame of not settling, vs the risk of a loan going bad.

I havent ever had a lender not proceed with a formal if the conditions of the pre approval have been met, AND any subsequent notices to the pre app have been complied with

ta
rolf