In This Week’s How’s The Market | Edition 160
Interest rates went up again yesterday.
And every time this happens, we get the same questions.
“Should I wait?”
“Is the market going to fall?”
“Is now a bad time to buy?”
And I get it.
On the surface, rate rises feel negative.
But what most people don’t realise is – they don’t just impact prices.
They impact behaviour.
They impact confidence.
They impact competition.
And right now, that’s where things get interesting.
Because while a lot of buyers are stepping back… the ones who understand what’s actually happening are starting to lean in.
So today, we’re going to break down what this latest rate rise actually means for Melbourne buyers – and where the opportunity (and risk) sits right now.
Rates Just Went Up Again… Here’s What It Means for Melbourne Buyers
1. Borrowing Capacity Is Shrinking
Interest rates went up again this week.
And while most people focus on what that means for repayments, the bigger impact right now is actually borrowing capacity.
As a rough rule, every 25 basis point increase reduces borrowing power by around $30k–$40k per $1M borrowed.
So if someone is borrowing $1M–$2M+, that’s a pretty meaningful shift.
And this compounds quickly.
It’s not just today’s rate rise. It’s the cumulative effect of multiple increases over time.
What this means in practical terms is:
- Buyers can’t stretch as far
- Fewer buyers can compete at the top end
- The depth of the market starts to thin out
And when that happens, leverage starts to shift.
2. Buyer Confidence Drops Faster Than Prices
This is the part most people misunderstand.
Rates go up and people immediately assume prices will collapse overnight.
That’s usually not what happens.
What drops first is confidence.
Buyers pause.
They wait.
They sit on the sidelines.
And that’s when:
- Open homes get quieter
- Auctions have less competition
- Agents start working harder to find buyers
Prices don’t need to dramatically fall for opportunity to exist.
Less competition alone can create it.
3. More Listings + Less Competition = Opportunity
What we’re seeing on the ground right now is:
- Listings building
- Some campaigns struggling
- Buyers becoming more cautious
That combination matters.
Because when supply increases and demand softens, buyers suddenly get options again.
And options create leverage.
Instead of fighting against 5–10 buyers for one property, you might be dealing with:
- One or two serious buyers
- Or sometimes none at all
That’s where negotiations change.
That’s where terms become flexible.
That’s where buyers can actually secure good assets well.
4. But This Is Where People Get It Wrong
Most buyers react emotionally.
They hear “rates rising” and immediately think:
“I’ll wait.”
But waiting isn’t always the safe option people think it is.
Because while you’re sitting on the sidelines:
- Competition can return quickly
- Confidence can bounce back
- The window can close
Markets rarely give you a clear signal when it’s time to buy.
By the time things feel comfortable again, the opportunity is usually gone.
5. This Is Not Risk-Free
That’s important to say as well.
Just because there is opportunity doesn’t mean there is no risk.
There is still:
- Downside risk in certain parts of the market
- Huge overpaying risk if you don’t understand value
- Execution risk if you don’t negotiate properly
You still need to:
- Buy well
- Understand comparable sales
- Stay disciplined
But right now, buyers have more room to do that than they’ve had in quite a while.
And that’s exactly what the smart buyers we’re seeing are doing right now.
They’re not rushing.
But they’re not sitting out either.
What The Agents Are Saying
Agents are telling me often that at the moment, vendors are worried.
Some are panicking.
A lot of vendors are willing to do massive price drops now just to get out of the market.
Some vendors have already bought and are caught between a rock and a hard place as they are forced to drop their sale price by $100k – $500k+
A few agents have now told me that they expect listings to increase into winter as some vendors struggle to hold onto properties with the new cash rate.
Many have already reported an increase in off markets as vendors start to test the waters before launching into full campaigns.
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Final Thoughts
At the end of the day, rate rises don’t remove opportunity – they reshape who’s willing to act.
The buyers who stay informed, disciplined, and value-focused are the ones who win while others sit and wait.
If you or someone you know would like assistance to buy this year, book in a call and we can discuss if we can help.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at [email protected]
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
