RBA lift the cash rate to 4.35%
The Reserve Bank of Australia (RBA) just raised the official cash rate to 4.35%. We all know what this means, borrowing money becomes more expensive, and monthly mortgage repayments increase. Our advice to investors is to choose areas with potential high capital growth or where the rental returns will grow at a higher pace.
Strategy 1: Minimise debt exposure
In a high-interest environment, the smartest move is to reduce the total amount needed to borrow. Melbourne is currently the most affordable capital city in Australia, offering a much lower “entry price” than its northern rivals: Sydney and Brisbane.
To illustrate how these values are impacted by a 0.25% interest hike, consider a scenario where this increase adds $1,296 annually to an $830,000 property, compared to a $2,016 jump for a $1.3 million property. By choosing the more affordable option, investors save $720 annually on the hike alone and over $27,800 in total yearly repayments, providing a vital safety buffer against the rising cost of borrowing.*
Strategy 2: Target high-yield suburbs
To “beat” a rate hike, investors should prioritize properties with high rental yields, ideally above 4.0%.
While many markets have seen yields compress, Victoria remains home to several “powerhouse” areas where rental returns remain remarkably resilient despite steady price growth. At McMullan & Bird, we specialise in identifying regions with potential high-growth, specifically targeting high-yield opportunities priced under $850K.
Final thoughts
When the RBA raises rates, the margin for error shrinks. The goal is no longer just to buy property, but to reduce the out-of-pocket.
By entering the Victorian market at a lower price point (~$830k) and targeting high-yield areas, your clients aren’t just “surviving” the 4.35% rate, they are positioned to outpace it through lower repayments and stronger rental returns.
* These figures are estimates provided for illustrative purposes only.
