Rate hike squeezes first‑home buyers as entry‑level prices climb in Sydney and Melbourne

Australia’s third consecutive rate hike has lifted mortgage costs, squeezing both existing owners and those trying to enter the market. Dani Hunterford, a full‑time worker studying law, said the situation feels “quite distressing” as she and her husband struggle to save a deposit while paying high rent. The deposit guarantee scheme, which lets first‑home buyers purchase with as little as 5% down, has boosted demand at the lower end of the market, pushing prices up there even as overall values slip.

- The lowest‑priced 25% of homes in Melbourne rose 0.5% in April; in Sydney the same segment gained 1.5%. - Perth home values increased 9.2% from the start of the year to April. - Despite these gains, broader Sydney and Melbourne prices fell 0.6% and 0.9% respectively over the quarter.

First‑home buyers face a double pressure: higher borrowing costs cut their loan capacity, while the segment they target keeps getting more expensive. Each rate rise could trim a typical buyer’s borrowing limit by about $17,000, potentially turning a viable purchase into a miss. With Perth’s strong price growth and the east‑coast entry‑level market defying the broader downturn, affordability is likely to worsen before it improves.