Victorian interest rate rise: New monthly mortgage repayments

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Market volatility has rattled super balances, but rising rents and strong housing demand are driving a renewed push into property as a long-term wealth play.

The latest interest rate rise will slug Victorian homeowners about $90 a month, with warnings some families face a $200 monthly hit if more hikes follow.

Families in Victoria’s growth corridors, including Werribee, Tarneit, Craigieburn, Pakenham and Geelong, are among those most exposed as mortgage pain builds across some of the state’s busiest housing markets.

PropTrack data shows these suburbs continue to record some of the highest house sale volumes in Victoria, placing them at the centre of the cost-of-living crunch now hitting borrowers.
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Baseline Financial director Ari Levinson said Tuesday’s .25 percentage point rate rise would increase mortgage repayments for typical borrowers by more than $90 a month across many of those suburbs.

Mr Levinson used modelling of PropTrack data for the top-selling suburbs to calculate the typical repayment changes in the suburbs on a 30-year principal-and-interest loan at an 80 per cent loan-to-value ratio.

Two further increases would push that hit closer to about $180 to $200 a month, with larger loans facing even steeper rises, he said.

“These are average figures, and the impact becomes more significant as loan sizes increase,” Mr Levinson said.

In suburbs such as Tarneit, Pakenham and Craigieburn, where many buyers entered the market with smaller deposits, the increase is landing at the same time as rising household costs.

Baseline Financial director Ari Levinson says investors are reassessing their strategies as market swings highlight the appeal of stable, income-generating assets.

The pressure was most evident among first-home buyers who purchased during the low-rate environment and were now facing higher repayments, Mr Levinson said.

“Some borrowers, particularly first-home buyers who purchased with higher loan-to-value ratios, are starting to feel the brunt of the rate rises,” he said.

“They bought when interest rates were lower and are now facing higher repayments at a time when their broader cost of living is also rising.”

Rather than triggering a wave of forced sales, he said most households were tightening their belts.

Couple checking their home finances and looking worried

Property remains a cornerstone investment for many Australians, offering both long-term capital growth and steady rental income in a tight market.

“What we are seeing is households cutting back on discretionary spending, fewer holidays, eating out less, and being more conscious of their day-to-day expenses.”

He added that many borrowers were refinancing or exploring fixed-rate options to provide greater certainty.

Pressure is also building across parts of Geelong, particularly in growth corridors where many buyers purchased during the pandemic upswing with higher leverage.

In Melbourne, the strain is more visible in outer suburban markets where buyers stretched to enter the market, while in Geelong it is concentrated among those now facing higher household costs as they move into new life stages.

Industry leaders warn market volatility is reshaping investor behaviour, with more Australians looking to diversify beyond traditional share-based portfolios.

Jellis Craig chief executive Andrew McCann said the market was becoming more sensitive as borrowing costs rose.

“We’re not seeing significant mortgage stress, but we are seeing economic pressure influencing how people act in the market,” Mr McCann said.

“It’s adding pressure to the daily grind, and that absolutely feeds into buyer behaviour.”

Mr McCann said rising rates were shifting negotiating dynamics, with vendors increasingly needing to meet the market as borrowing capacity tightened.

“It’s not forced selling, but it is a shift in negotiating dynamics,” he said.

Capital city skylines continue to evolve as population growth and housing shortages underpin long-term demand for property.

Convergence Buyers Agents director Sky Hammer said the impact of higher rates was beginning to reshape purchasing decisions, particularly at the lower end of the market.

“Most of our clients are still pushing ahead,” Mr Hammer said.

“But buyers who may have previously been stretching beyond $1m are now being pushed into that bracket as borrowing capacity tightens.”

He said first-home buyers were likely to feel the greatest pressure in the months ahead, particularly those entering the market with minimal deposits.

“Over the next six months, they’re the cohort most likely to feel the pressure,” Mr Hammer said.

At the same time, higher borrowing costs are starting to weigh on the top end of the market, where demand has softened as confidence pulls back.

How much more could you be paying each month?

Suburb	Median sale Price	Loan at 80% LVR	Current repayments per month	Amount extra per month	Another increase repayments per month	Amount extra per month
Tarneit	$670,000	$536,000	$3,214	$86	$3,300	$172
Craigieburn	$705,000	$564,000	$3,381	$90	$3,473	$181
Pakenham	$702,000	$561,600	$3,367	$90	$3,458	$181
Frankston	$838,000	$670,400	$4,019	$107	$4,128	$215
Armstrong Creek	$675,000	$540,000	$3,238	$86	$3,325	$174