Interest Rates, Property Prices & Property Settlements

Over the last two years there have been a number of interest rate rises, and Australian
families have had to weather the storm.

If you are going through a family law property settlement, it is important to consider the
impact of the changing financial landscape on your property settlement. Family law
litigants need to be forward thinking and consider a number of external factors when
considering how to divide the property of a marriage or relationship.

Impact of external factors

There is an element of uncertainty in property proceedings as external factors such as
interest rate increases or increases/decreases in property prices may have a material
effect on the outcome of a property settlement.

In a lot of cases, one party may seek to retain the former matrimonial home and make a
payment to the non-retaining party for their share of the equity. This often requires the
ability and approval to refinance the mortgage, and also the funds available or the ability
to increase the loan in order to make the payment to the other party.

A party might seek to retain a property on the basis that they estimate that the property
value will continue to increase in the near future, and a sale in the future will gain them a
greater long-term result, as opposed to selling the property immediately at separation
and dividing the net proceeds of sale after sales costs and taxes.

Interest rates

Homeowners are invariably the most affected by interest rate rises as they may affect
day-to-day expenditure and long-term financial planning. If you are going through a
family law separation and are seeking to retain a property, it is likely that you will need to
secure finance in order to effect the property division.

If you are seeking to retain a property, it may be prudent to consider the following,
amongst other factors:

  1. Whether you will be able to refinance the mortgage in your sole name, and
    whether you are able to borrow further to pay your former partner for their share
    of the property if required. If interest rates are high, it may affect your borrowing
  2. Will you be able to meet the costs of the property both now and in the future,
    including mortgage repayments, in addition to taxes, utilities, rates and other
    outgoings, noting in particular that the bills were likely shared before and may
    need to now be met on a single income.

In light of the above, a party may also consider retaining a property and placing it on the
rental market, or undertaking renovations and improvements with a view to sell that
property in the near future.

Increases and decreases in property prices

If you are looking at selling a property, or if you are being paid out for your share, it is
important to be aware of the current financial landscape and to consider the movement
of property prices in the future.

If you are considering retaining a property and paying out the other party’s share while
the property market is booming with an anticipated downturn, you may be find yourself
paying out a larger amount to the other party based on the current value.

Parties involved in a family law separation generally obtain a formal property valuation
which will provide a value of the property for any proposed pay out or negotiation,
however this valuation may need to be updated if a significant amount of time passes, or
if there are changes to the property markets.

Conversely, if you are the non-retaining party, it may be in your interest to finalise
property matters while the property market is hot, as any delays may adversely affect
the amount that you receive.

It is also important to consider that if the property is to be sold and the parties receive a
payout, then both parties may be left in position where neither of them will be able to re-enter
the property market. The parties may then have to engage in the rental market which, in a
post-COVID landscape, may be competitive and expensive. This may be
incentive to find a way to retain the property in one party’s name alone.

Take Away

Family law property settlements are complex, and it is always advised that potential
litigants seek legal advice from an appropriately qualified family law legal practitioner.

If you are going through a family law property settlement, you should seek advice from a
family lawyer who has experience considering a range of factors in property settlements,
and who has experience with the approach to property division taken by the Federal
Circuit and Family Court of Australia.

Parties to a family law dispute should also seek the advice of an independent financial
planner who can properly advise you on your financial circumstances, and may be able to
work cooperatively with your family lawyer to find a solution both legally and financially
viable for you.

Please note that the information contained in this article should not be considered financial

If you or someone you know wants more information or needs help or advice with a
divorce, please contact our Intake team on (03) 9364 7400 or email us at

This article is intended to provide general information only and is limited to the Victorian
jurisdiction only. You should obtain professional advice before you undertake any course
of action.

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