Australian mortgage holders are experiencing severe financial strain, with one individual describing large repayments as leading to ‘a cascade of health issues’ and causing people to postpone having children ‘because they simply can’t afford it’. This sentiment echoes across the nation as the Reserve Bank of Australia (RBA) implements its first interest rate hike in over two years, significantly impacting borrowers.
Dreams Dashed by Rising Costs
In regional New South Wales, a couple aged 25 and 26 saw their dream of building a home turn into a financial ‘hustle’ they no longer wish to maintain. After settling on land in September 2022, escalating rates and building material costs devastated their initial budget. The 25-year-old woman, who preferred anonymity, stated, ‘If we had known how much our repayments would end up, we never would have bought.’ While they can currently cover bills and groceries, the pressure has forced them to indefinitely delay major life milestones, such as starting a family.
Shifting to Alternative Living
Disappointed by the recent rate increase, the couple has decided to sell their newly finished home and pivot to the tiny house movement, citing ‘cost of living and lack of freedom’. She emphasised, ‘Humans are not meant to live this way. It’s causing a cascade of issues, health issues, a mental health crisis and the fact that so many people aren’t having kids because they simply can’t afford it.’
RBA’s Decision and Economic Impact
On Tuesday afternoon, the RBA increased the cash rate to 3.85%, a move widely anticipated but still a blow to mortgage holders. This decision marks the end of the shortest rate-cutting cycle in the RBA’s modern history, following three reductions in February, May, and August of last year. RBA Governor Michele Bullock defended the hike in a press conference, stating, ‘It is the right thing for the economy. I understand that people with mortgages find that hard, but the alternative is potentially even harder.’
Financial Strategies Under Pressure
Gold Coast first home buyer Jack Petzke, who settled on his house in October 2025 with partner Alyshia Cater, employs strict budgeting and an offset account to manage rising costs. With an upcoming wedding in May, financial pressure is compounded, forcing the couple to balance savings and mortgage security. Petzke noted, ‘The rate increase is going to cause everything to go up, I’ll need to revise our budget to make sure we’re still putting enough in on a weekly basis.’
Lauren Hall, a mortgage broker at Loan Market, explained that a quarter-point increase could add around $100 extra per month for the average mortgage. Anja Pannek, CEO of the Mortgage & Finance Association of Australia, highlighted that for an average household with a $694,000 mortgage, this equates to an extra $109 in monthly repayments, affecting millions of borrowers.
Feelings of Punishment and Anxiety
A 31-year-old Melbourne man, who bought his first home in October 2025, described Tuesday’s rate hike as feeling like a ‘punishment’. To secure his mortgage on a single income, he took on a casual job alongside his full-time role, sacrificing travel and social events. Despite not borrowing to his maximum, he now experiences anxiety and anger, arguing that decision-makers are ‘punishing the wrong people for very little benefit.’ He warned that further hikes could lead to ‘a considerable lifestyle impairment’ and damage the economy by reducing discretionary spending.
Expert Advice and Future Outlook
Pannek advised mortgage holders to seek professional expertise from brokers. Spiro Kolokithas, managing director of What if We Finance, echoed this, noting that advice from professionals is more valuable than sources like TikTok. He predicted that while one rate rise might not cause a huge dent in borrower activity, multiple increases could lead to a slowdown, forcing people to budget more carefully and impacting them psychologically.
Overall, the RBA’s interest rate hike is exacerbating financial pressures for Australian mortgage holders, leading to health concerns, delayed family plans, and calls for greater support and planning in the face of economic challenges.
