Rate hikes in February and March 2026 have introduced uncertainty, with the cash rate rising to 4.10%. A median household lost approximately $18,000 in borrowing capacity from the February hike alone (Cotality), though affordable outer-suburban properties continue to outperform the city median.
The shift from rate cuts in 2025 to consecutive hikes in early 2026 has altered buyer behavior in the eastern suburbs. We are seeing a noticeable tightening in borrowing capacity, which directly impacts the pool of eligible buyers for mid-to-high range homes.
Buyer borrowing power
The RBA raised the cash rate to 3.85% in February and 4.10% in March 2026. For a $600,000 mortgage, each 25bp hike increases repayments by approximately $90–$100 per month, while variable rates are now pushing above 6% for many borrowers.
Melbourne’s relative value
The median house price gap between Melbourne and Sydney now exceeds $600,000. While Melbourne’s median has dipped below Perth’s, growth in Perth is forecast to slow to 1.6% in 2026 (KPMG) as affordability constraints bite.
Performance of the affordable segment
Properties under $800,000 in outer suburbs are outperforming the broader Melbourne median. This trend extends to villa units in inner suburbs, while inner-city high-density apartments have seen softer conditions.
The inflation risk
The RBA forecast that inflation could peak at 4.2% by mid-2026, driven by sticky inflation and geopolitical pressures pushing oil prices over USD $100/barrel. This creates uncertainty regarding whether the March hike was the final adjustment or the start of a longer cycle.
Frequently asked questions
How do the 2026 rate hikes affect my property’s value?
The February and March 2026 rate hikes to 4.10% have reduced borrowing capacity. A median household lost approximately $18,000 in borrowing power from the first hike alone (Cotality). This typically puts downward pressure on prices for mid-range homes as buyers can no longer afford the same loan amounts.
Is Melbourne still a good value compared to other cities?
Melbourne remains significantly discounted compared to Sydney, with a median house price gap exceeding $600,000. While Melbourne’s median has dipped below Perth’s, other capitals like Perth are forecast to slow growth to 1.6% in 2026 (KPMG), potentially shifting buyer interest back toward Melbourne’s relative value.
Which property types are performing best right now?
Affordable houses under $800,000 in outer suburbs and villa units in inner suburbs are currently outperforming the city median. Conversely, inner-city high-density apartments have experienced softer conditions. New-builds are concentrated in specific corridors rather than being spread across the eastern suburbs.
When is the best time to sell in 2026?
Rate hikes in early 2026 have introduced uncertainty. However, Melbourne recovered strongly in 2025 with median house prices increasing 11–14%. Sellers should monitor inflation, which the RBA forecasts could peak at 4.2% by mid-2026, as this will likely dictate further interest rate movements.
Questions to ask your agent
- How has the $18,000 drop in median borrowing capacity (Cotality) affected the number of qualified buyers for my specific price bracket?
- What is the current demand for villa units versus high-density apartments in this specific pocket of the eastern suburbs?
- How does my property’s price point align with the current trend of outer-suburban houses outperforming the city median?
This article contains general market information based on data current as at April 2026. It does not constitute financial, legal, or real estate advice specific to your property or circumstances. For an appraisal and tailored advice, speak with a Fletchers agent in your area.