The mortgage landscape in Perth has seen significant shifts over the last few years, and 2025 is shaping up to be another year of change. For potential homebuyers, investors, and those looking to refinance, understanding the key trends and the factors influencing the mortgage market is crucial.
Rising Interest Rates: What Borrowers Need to Know
One of the most notable trends in 2025 is the upward movement of interest rates. After years of low rates designed to stimulate the economy, the Reserve Bank of Australia (RBA) has started increasing rates to tackle inflation. This shift has a direct impact on mortgage holders, particularly those with variable-rate loans.
For new borrowers, the cost of borrowing has increased. A rise in interest rates means higher repayments, which can significantly affect a household’s budget. For existing homeowners, those on variable rates may be feeling the pinch as their monthly payments rise. Fixed-rate borrowers may have some relief initially, but as their fixed terms come to an end, they too will face the reality of higher rates.
Understanding how interest rate changes affect mortgage affordability is essential. The more the RBA raises the rates, the more pressure it puts on borrowers’ ability to service loans, especially for those in the lower income brackets. Homebuyers need to factor in these rate increases when determining how much they can comfortably borrow.
Borrowing Capacity in 2025: What’s Changed?
In response to market volatility and interest rate hikes, banks and lenders have tightened their lending criteria. As of 2025, lenders are looking more closely at borrowers’ ability to repay their loans, taking into account current living expenses, any existing debts, and how much disposable income is left after all obligations are met.
One major change is the way lenders assess living expenses. Previously, banks may have allowed for generous expense estimates, but now they’re more conservative. With inflation affecting everything from groceries to petrol, lenders are factoring in these rising costs to ensure that borrowers can manage their repayments even in a higher interest rate environment.
Additionally, many lenders are now conducting more rigorous checks on borrowers’ overall financial health. This includes stress testing borrowers against potential rate hikes, ensuring that borrowers can manage higher repayments should rates increase further. For borrowers, this means that the amount they can borrow may be reduced compared to previous years, even if their income levels have stayed the same.
House Prices in Perth: The Market Outlook for 2025
Perth’s property market has experienced a rollercoaster ride over the past few years. In 2023 and 2024, house prices in Perth saw a significant rebound after a period of stagnation, largely driven by a strong local economy and high demand for properties.
However, in 2025, things are cooling down slightly, particularly as borrowing becomes more expensive with higher interest rates. Although Perth remains one of the more affordable major cities in Australia compared to Sydney and Melbourne, the pace of price growth has slowed. With fewer buyers able to afford higher mortgage repayments, the demand for property could soften, leading to a moderation in price growth.
First-time homebuyers may find it more difficult to break into the market due to higher borrowing costs, although government initiatives like the First Home Owner Grant (FHOG) and various stamp duty concessions may provide some relief. However, it’s worth noting that these schemes might not go as far in today’s market, especially as prices in some areas of Perth continue to edge upwards.
Refinancing Options: Should You Stay or Switch?
For homeowners in Perth who currently have a mortgage, 2025 presents an important opportunity to evaluate refinancing options. With interest rates on the rise, many borrowers are feeling the squeeze. Refinancing could be a way to secure a better deal or lock in a more competitive rate before rates increase further.
When considering refinancing, it’s essential to weigh up the pros and cons. On one hand, refinancing could lead to lower monthly payments or more favourable loan terms. On the other hand, the process of refinancing can be time-consuming, and there may be fees involved. Additionally, as lenders tighten their lending criteria, securing a refinancing deal that’s better than your current one could be challenging.
Government Policies and Initiatives
In 2025, the Australian government continues to support the housing market with various policies designed to assist first-time homebuyers and those looking to enter the property market. These include the First Home Loan Deposit Scheme (FHLDS), which allows eligible buyers to purchase a home with a smaller deposit, as well as various stamp duty concessions and grants available in Perth.
Additionally, there are measures in place to support renters and make the market more accessible for those on lower incomes. The introduction of affordable housing initiatives and rent subsidies may help offset the financial strain caused by higher interest rates and rising living costs.
What’s Next for Perth’s Mortgage Market?
As we move further into 2025, it’s expected that Perth’s mortgage scene will continue to evolve. Rising interest rates and tighter lending criteria will likely keep pressure on the housing market, but Perth’s relatively affordable property prices could continue to attract interstate buyers and investors.
For buyers looking to enter the market, it’s important to act quickly and secure a mortgage deal that works for their budget. It’s also critical to factor in the ongoing cost of borrowing, as rate increases are likely to continue over the short to medium term.
