Higher interest rates are back – and Australian borrowers are now being squeezed both by bigger monthly repayments and smaller bank budgets.
On Tuesday, the Reserve Bank lifted the cash rate to 3.85%, the first increase in two years, and signalled that more tightening may be needed to tame stubborn inflation. Governor Michele Bullock said “the underlying pulse of inflation is too strong,” acknowledging that “[a hike] is not the news that Australians with mortgages want to hear, but it is the right thing for the economy.”
Fresh analysis from realestate.com.au shows just how sharply repayments will rise off record‑high prices. Using median values from the PropTrack Home Price Index and assuming a 30‑year loan at 80% LVR, the rate rise adds around $200 a month for a typical Sydney house buyer, taking repayments to about $5,775, Mortgage Choice reported.
Borrowers in Brisbane and Perth face monthly increases of roughly $149 and $132 respectively, while Adelaide, Canberra and Melbourne owners are looking at an extra $1,500 a year in interest.
Even in the more affordable capitals, Hobart and Darwin, the extra monthly hit is estimated at around $95 and $83. Unit owners are not spared, with repayments on median‑priced apartments in Sydney and Brisbane rising by just over $100 a month.
The Real Estate Institute of Australia warns the move could undo recent affordability gains, saying “this rate increase threatens to halt positive momentum and will place renewed pressure on buyers and mortgage holders.”
For would‑be buyers, the blow is just as real – even before they sign a contract. Canstar.com.au estimates an individual on the average full‑time wage of $104,807 can now borrow about $12,000 less after the February move. If a second 0.25 percentage point hike lands in May, that shortfall could widen to $24,000.
“Tuesday’s rate hike will shave roughly $12,000 off the average Australian’s maximum home‑buying budget,” Canstar’s data insights director, Sally Tindall, said.
Tindall notes that while this “will probably take some momentum out of the property market, … a widespread fall in prices is unlikely,” given ongoing supply and demand imbalances.
“If you’re about to take on a whopping great loan, it’s worth running this stress test yourself,” Tindall said, adding that pre‑approved buyers should go back to their bank to reconfirm how much they can safely spend.
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