Highlights

  • The Reserve Bank of Australia raised the cash rate target from 4.35 per cent to 4.60 per cent on 29 September 2026.
  • The Bank said housing prices fell by more than expected, with the cumulative fall likely to exceed its August forecasts.
  • New housing loan commitments fell sharply, led by lending to investors.
  • Scheduled mortgage payments are about 10 per cent of household disposable income.
  • Housing loan arrears and impairments remain low.

Australia's housing market has softened through 2026 after a long run of price growth, and the Reserve Bank of Australia (RBA) has tracked the shift closely in its recent publications. Following a further rise in the cash rate target on 29 September 2026, the RBA's Board minutes describe falling prices, cooling demand for home loans and household finances that remain, so far, in sound condition.

Prices Fall Faster Than Forecast

In its August 2026 Statement on Monetary Policy, the RBA reported that national housing prices had declined by 1.6 per cent from their March peak. Price growth and transactions in the established market eased by more than the RBA assumed in its May forecasts, and auction clearance rates had fallen.

The RBA linked the slowdown to earlier cash rate increases, tax changes announced in the federal budget and weaker sentiment among home purchasers.

By the September meeting, the minutes stated that housing prices had fallen by more than expected. Established housing prices continued to fall faster than anticipated, and RBA staff assessed that the cumulative decline was likely to be larger than assumed in the August forecasts.

The Rate Decision

The Board left the cash rate target unchanged at 4.35 per cent at its August meeting. On 29 September 2026 it unanimously raised the target by 25 basis points to 4.60 per cent. According to the minutes, members judged the increase appropriate to reinforce the anchoring of medium-term inflation expectations.

The minutes also noted that the wealth effects of falling prices on consumption tend to be relatively modest.

Lending Cools While Repayments Rise

The September minutes reported a sharp fall in new housing loan commitments, led by lending to investors. The RBA attributed this to tighter monetary policy, recent tax changes and a partial reversal of earlier price gains.

Banks have passed on the cash rate increases to deposit and lending rates. Scheduled mortgage payments have risen to about 10 per cent of household disposable income, roughly their 2024 peak.

How Households Are Coping

Housing loan arrears are low, and loan impairments are near historical lows, according to the minutes. The share of owner-occupier borrowers facing a cash flow shortfall is under 2 per cent, well below its 2023 to 2024 peak.

Very few borrowers are in negative equity. RBA staff analysis suggests this would likely remain the case even if prices fell by 20 per cent.

Key Insights

The RBA's publications confirm three developments: housing prices have fallen by more than the Bank expected, housing credit demand has cooled, and the cash rate target has risen to 4.60 per cent. The same documents describe household credit performance as sound, with low arrears and few borrowers in negative equity.

The size of the eventual price decline remains uncertain. The RBA has said only that the cumulative fall is likely to be larger than it assumed in August. Its view that wealth effects on spending are modest is an assessment, not a measured outcome, and mortgage repayments are already near their 2024 peak relative to income.