How Much Will Interest Rate Rises Really Cost?

The RBA’s recent decision to increase the cash rate has many market watchers worried about widespread mortgage distress. And talk of further interest rate rises has many mortgage holders worried that they will struggle to make ends meet. But how much more should you really be expecting to pay?

Here we take a quick tour around the capitals and look at how much the average mortgage payment will increase. We also consider what this increase means, in real terms, for the average mortgage holder.

Please note: The below calculations are based on each area’s median dwelling value as at the end of April. They represent a 1% increase to the average variable interest rate, from 2.98% to 3.98%. They are also based on an 80% LVR, 30-year loan term, and principal and interest repayments.

Sydney is easily Australia’s most expensive capital to buy property in, with a median price just short of $1.12m. This means a loan of around $893,000, which will see payments increase by $115 a week if rates rise by 1%. This is roughly the same as catching a show (A Reserve ticket + booking fee for Archie Roach and the Sydney Symphony Orchestra) at the Opera House.

Canberra is currently sitting second on the list of most expensive capital city property markets, with a median price of $909,379. This means a loan of around $707,500, which will see payments increase by $93 a week if rates rise by 1%. This is roughly the same as drinks with friends (two Negronis, two Manhattans, and a Garage Projects Pale Ale) at Hippo Co.

Melbourne is third on the list, with a median price of $799,756. This means a loan of around $639,000, which will see payments increase by $82 a week if rates rise by 1%. This is roughly the same as brunch (the breakfast board, the house made granola, two long blacks, and two mimosas) at Auction Rooms.

Hobart is next, with a median price of $724,366. This means a loan of around $579,500, which will see payments increase by $74 a week if rates rise by 1%. This is roughly the same as a Stay at Home and Party Alone Pack and two bars of handmade vegan soap from the Salamanca Market.

Brisbane is quickly closing the gap on Hobart, with recent sustained growth bringing the median price up to $722,433. This means a loan of around $578,000, which will also see payments increase by $74 a week if rates rise by 1%. This is roughly the same as going to the footy (two standard seats at the next Brisbane Lions home game) at The Gabba.

Adelaide is currently the sixth most expensive capital city to buy property in, with a median price of $593,883. This means a loan of around $475,000, which will see payments increase by $61 a week if rates rise by 1%. This is roughly the same as a 14-day MetroCARD unlimited travel pass.

Perth is next on the list, with a median price of $535,335. This means a loan of around $428,250, which will see payments increase by $55 a week if rates rise by 1%. This is roughly the same as a one-way trip (ferry ticket + island admission fee) from Fremantle to Rottnest Island.

Darwin is currently the most affordable capital to buy property in, with a relatively modest median price of $495,573. This means a loan of around $396,500, which will see payments increase by $50 a week if rates rise by 1%. This is roughly the same as a sunset dinner (two Laksas, two Lassis, and two crepes) at the Mindil Beach Markets.

If you are worried about the impact rising interest rates will have on your portfolio, give your mortgage provider a call. They can work with you to review your investments to make sure all the numbers will still stack up. 

If you would like help to identify potential opportunities to consolidate your gains and boost your returns then get in touch with Search Party Property. Take advantage of our free 30 minute property investor assessment to ascertain how you can move forward on your property investment journey.