Australia’s first rate hike in two years is set to push capital city mortgage repayments up by as much as $200 a month, with the Reserve Bank flagging more tightening ahead.
Governor Michele Bullock this week warned higher interest rates will be necessary to rein in persistent inflation, after the central bank hiked the cash rate to 3.85% on Tuesday.
“The underlying pulse of inflation is too strong,” she said in a media conference following the decision.
“[A hike] is not the news that Australians with mortgages want to hear, but it is the right thing for the economy.”
Calculations from realestate.com.au show highly-indebted borrowers in the capital cities are set to feel the biggest pinch, with the 25 basis point hike set to flow through to those with a variable rate home loan over the coming weeks.
RBA governor Michele Bullock announced rates would rise this week. Picture: Nikki Short
The four big banks – Westpac, National Australia Bank (NAB) , ANZ and Commonwealth Bank (CBA) – have all confirmed variable interest rates on their home loans will be increased in line with the hike.
CBA, NAB and ANZ said the higher mortgage rates will take effect from Friday 13 February, and Tuesday 17 February for Westpac borrowers.
It's a blow for those who've stretched themselves to get into the red-hot property market in recent months, with a typical Sydney buyer who purchased a freestanding house now facing an additional $200 per month in interest repayments than before the first rate hike - or $2,450 a year, the analysis shows.
Using median property price data from the latest PropTrack Home Price Index, realestate.com.au has calculated the estimated monthly mortgage hit in each capital city assuming a 30-year loan with an 80% Loan to Value.
The calculations have been split for freestanding houses and units, with homeowners in Sydney, Brisbane and Perth facing the largest hip-pocket hit.
How much the rate rise could increase mortgage payments in each capital – Houses
| City | Current median value | Loan amount | Current monthly repayments | Monthly repayments with 25bp hike | Monthly difference |
| Sydney | $1,617,000 | $1,293,600 | $7,344.92 | $7,549.10 | $204.18 |
| Brisbane | $1,178,000 | $942,400 | $5,350.84 | $5,499.59 | $148.75 |
| Perth | $1,045,000 | $836,000 | $4,746.72 | $4,878.67 | $131.95 |
| Adelaide | $996,000 | $796,800 | $4,524.14 | $4,649.91 | $125.77 |
| Canberra | $1,012,000 | $809,600 | $4,596.82 | $4,724.61 | $127.79 |
| Melbourne | $1,007,000 | $805,600 | $4,574.11 | $4,701.26 | $127.15 |
| Hobart | $759,000 | $607,200 | $3,447.61 | $3,543.45 | $95.84 |
| Darwin | $665,000 | $532,000 | $3,020.64 | $3,104.61 | $83.97 |
For a median-priced house in Sydney, monthly repayments on the back of this month’s rate rise are calculated to go up $204 to reach a whopping $5,775.04.
In the nation’s second and third-most expensive capital cities of Brisbane and Perth, monthly repayments on houses will jump $149 and $132 respectively - or more than $1,700 and $1,500 a year.
Adelaide (+$126), Canberra (+$128) and Melbourne (+$127) borrowers face an additional $1,500 per year in interest repayments.
Hobart, Tasmania. Picture: Getty
Borrowers in Hobart could see their repayments jump around $95 per month, followed by Darwin, the nation’s most affordable capital, where borrowers paying off a median-priced house can expect an extra $83 a month on their loan.
Mortgage repayments for median priced units are also set to rise by hundreds of dollars a year.
In Sydney and Brisbane where the current median value of units is highest among capital cities, PropTrack calculates monthly repayments will rise by just over $100 a month, or more than $1,200 per year.
How much the rate rise could increase mortgage payments in each capital – Units
| City | Current median value | Loan amount | Current monthly repayments | Monthly repayments with 25bp hike | Monthly difference |
| Sydney | $871,000 | $696,800 | $3,956.35 | $4,066.34 | $109.98 |
| Brisbane | $811,000 | $648,800 | $3,683.82 | $3,786.22 | $102.41 |
| Perth | $676,000 | $540,800 | $3,070.60 | $3,155.96 | $85.36 |
| Adelaide | $686,000 | $548,800 | $3,116.03 | $3,202.65 | $86.62 |
| Canberra | $593,000 | $474,400 | $2,693.59 | $2,768.47 | $74.88 |
| Melbourne | $624,000 | $499,200 | $2,834.40 | $2,913.20 | $78.79 |
| Hobart | $590,000 | $472,000 | $2,679.96 | $2,754.46 | $74.50 |
| Darwin | $441,000 | $352,800 | $2,003.16 | $2,058.85 | $55.69 |
The median value of a unit is similar in Melbourne, Perth and Adelaide, where repayments are forecast to rise $79, $85 and $87 a month respectively.
The latest realestate.com.au Property Market Outlook expects property prices to rise by between 6-8% in 2026, slightly weaker than the pace of growth seen in 2025.
The median price of a home in a capital is currently sitting at a record high of $988,000.
Affordability warning
The Real Estate Institute of Australia issued a stark warning on housing affordability following Tuesday’s rate hike, saying progress will continue to stall.
While average loan repayments accounts for a massive 47% of median family income in Australia, last year had brought significant improvements.
Loan repayments on property make up almost half of median family income across Australia. Picture: Getty
The three rate cuts handed down by the Reserve Bank in 2025 saw three consecutive quarters of affordability improvement, which is now at high risk of being reversed.
“This rate increase threatens to halt positive momentum and will place renewed pressure on buyers and mortgage holders,” Real Estate Institute of Australia president Jacob Caine said.
“Chronic supply shortages drive higher prices, higher inflation and, ultimately, higher interest rates.”
Federal Minister for Housing Clare O’Neil acknowledged the rate hike is “a really tough moment for Australian households”, admitting the government has a key role to play in softening the blow.
“The government's got a really important job here and that is how we can provide as much cost-of-living support for families to help them manage this change without contributing to the inflation problem,” she said on Sunrise.
“Our government's only focus right now is on cost of living, cost of living, cost of living. What can we do to help relieve the pressure on your household without making this economic situation worse.”
Repayments could be under more pressure as the year goes on, with momentum already building around expectations for another rate hike.
Following Tuesday's interest rate hike and statement on monetary policy - which included updated economic forecasts on inflation expectations - Australia's largest lender CBA revised its interest rate forecast to now expect another 25 basis point increase in May, which would take the cash rate to 4.10%.
NAB also anticipates one more rate hike in 2026, while Westpac and ANZ both expect rates to remain on hold for the remainder of the year.
The RBA will make its next rates decision on 17 March.
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