Aussie mortgage holders are facing ongoing pressure as the RBA’s 5-4 split signals interest rates could stay higher for longer, with further repayment pain looming.
Aussie borrowers are staring down the barrel of more mortgage pain after a 5-4 split inside the Reserve Bank exposed a battle over how far interest rates still need to rise.
The warning comes as households face rising repayments and shrinking budgets, with experts saying the pressure cycle has not yet broken.
The RBA lifted the cash rate 25 basis points to 4.10 per cent at its March meeting, with board minutes revealing a narrow 5-4 vote as policymakers clashed over whether to hike immediately or wait.
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A single 25 basis point increase can add hundreds of dollars a month to repayments on a typical mortgage, compounding pressure for already stretched households.
Inflation remains stuck at 3.8 per cent, with underlying inflation at 3.4 per cent, still above the RBA’s 2-3 per cent target, while global instability threatens to push costs higher.
Markets are still pricing a greater than two-thirds chance of another rate rise, meaning borrowers could face further repayment increases in the months ahead.
Real Estate Institute of Australia president Jacob Caine said mortgage holders were effectively “staring down the barrel” of continued financial strain.
“We’re dealing with rising borrowing costs, persistent inflation and global instability feeding directly into household budgets,” Mr Caine said.
“For existing borrowers, that means higher repayments and less breathing room. For those trying to enter the market, it means a tougher and more expensive pathway to homeownership.
“Put simply, the pressure cycle hasn’t broken yet and for many Australians it’s still intensifying.”
REIA president Jacob Caine says Aussie borrowers are “staring down the barrel” of rising mortgage pain.
Mr Caine said the split decision showed there was no clear consensus on the path forward, leaving borrowers exposed to further uncertainty.
“Inflation pressures remain embedded, which keeps the door open to further tightening,” he said.
“There is also a real risk that pushing rates higher could trigger a sharper economic slowdown.
“We’re in a balancing act. The drivers for another hike are visible, but so are the consequences.”
He said the impact of rising rates was being felt unevenly across the economy.
“Mortgage holders wear it directly through higher repayments, renters feel it through rising rents, while others are benefiting from higher interest rates,” Mr Caine said.
“That imbalance is part of what is keeping inflation pressures alive.”
Ray White AKG principal Avi Khan warns a “perfect storm” of interest rate pressure and negative gearing uncertainty is weighing on investor confidence and slowing property market momentum.
Ray White AKG principal Avi Khan said uncertainty around interest rates was now being compounded by policy concerns, creating a “perfect storm” for investor hesitation.
“When you combine uncertainty around rates with uncertainty around negative gearing, it creates a perfect storm for investor hesitation,” Mr Khan said.
“There is a real sense of uncertainty, and buyers are budgeting more cautiously, building buffers and, in many cases, delaying purchases.
“The RBA’s disunity is seeping into market confidence, and the signals being sent right now are absolutely crucial.”
He said momentum in the market was beginning to shift as caution replaced urgency.
“The urgency that was driving buyers into the market is starting to ease, and caution is beginning to replace that momentum,” Mr Khan said.
The Reserve Bank’s 5 to 4 split decision to lift interest rates to 4.10 per cent highlights growing uncertainty over future rate hikes as inflation remains above target. Picture: NewsWire / Gaye Gerard
Investors were becoming more selective, focusing on rental yield and cash flow as expectations for capital growth softened.
“There are deals investors would have pushed ahead with three months ago that they are now pausing on,” he said.
Mr Khan said the combination of further rate rises and policy uncertainty could have broader consequences across the housing market.
“If we see another rate rise alongside that uncertainty, the market would go backwards,” he said.
“When investor confidence is hit and supply tightens, renters are usually the first to feel it.”
He said the core issue remained structural.
“We do not just have an affordability problem, we have a supply problem, and until we create more homes, the pressure will remain,” Mr Khan said.
Alba Advantage director Thomas Mifsud says buyers are still active despite rising mortgage costs, with fear of missing out continuing to drive competition in the property market.
On the ground, demand has not fallen away, but buyer behaviour is shifting.
Alba Advantage director Thomas Mifsud said buyers remained active despite the rising cost environment.
“They’re still competing strongly,” Mr Mifsud said.
“Buyers aren’t freezing, they’re moving with more discipline and relying on what they can actually afford.”
He said another rate rise could quickly impact borrowing capacity, making timing critical for buyers.
“It’s a very fine line right now. Timing has become critical,” he said.
Despite the pressure, fear of missing out continues to drive activity.
“They’re pushing ahead because of fear of missing out. That FOMO is still very real,” Mr Mifsud said.
But with inflation still above target, the Reserve Bank divided on the path forward and markets expecting further tightening, industry figures warn borrowers should prepare for the likelihood that mortgage pain is not over yet.
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