At a Glance

The RBA raised the cash rate to 4.60% on 29 September, the fourth increase this year. All four major banks will pass it on from 9 October.
Inflation for August came in at 4.0%. Markets now put the chance of another hike in November at around one in five.
National home values fell 1.1% in September, the sixth month in a row. They’re now 5.2% below the March peak and no higher than a year ago.
Auction clearance rates dropped to a 10-week low of 50.3% last weekend (preliminary figure).
Demand for home loans fell for a fifth straight month.
Rents are still rising, but vacancy is edging up and rental yields are the highest since 2019.

The Headline

Last month we said the next move in rates might not be down. It was up, and sooner than most economists expected. A month ago the forecasts had the cash rate topping out at 4.35%.

The day after the RBA’s decision, new inflation figures came out, and they’ve left the door open to another hike. At the same time, prices are falling in nearly every capital city, and the places that held up best earlier in the year are now falling fastest. Fewer people are applying for loans, and rents are still rising.

1. Interest Rates

The RBA board voted unanimously for the increase. It said inflation is still too high and that some of the risks it flagged in August have started to show up. That’s 1.00% of increases so far this year, and the RBA hasn’t ruled out more.

What the inflation numbers said

The ABS reported that prices were 4.0% higher than a year ago, up from 3.5% in July. A lot of that came from petrol, which jumped 14.8% in a single month, and from electricity. The RBA’s preferred underlying measure, which strips out the big swings, held steady at 3.6%.

Will there be another hike?

Nobody knows yet. At her press conference, Governor Bullock said the board had weighed up both a pause and a hike, and that the RBA wants to see how the four increases flow through the economy. After the inflation data, the market’s odds of a November hike dropped to about 20%.

The banks don’t agree either. ANZ expects a hike in November, and Westpac’s chief economist says it’s now her base case. The jobs market is cooling a little, with unemployment up to 4.6%, and the RBA has said a rate between 4.5% and 5% would help bring inflation down.

What it means for your loan

All four majors have confirmed they’ll pass on the full 0.25% from Friday 9 October. Their lowest variable rates will sit between 6.24% (Westpac) and 6.50% (ANZ). Macquarie follows on 15 October.

In dollar terms:

This increase adds about $79 a month on a $500,000 loan and roughly $95 on $600,000.
All four increases this year add up to around $365 a month on a $600,000 loan.
Those figures assume principal and interest repayments with 25 years left.

There’s a knock-on effect for anyone borrowing. Lenders test new loans at 3% above the actual rate, so a 6.5% loan gets assessed at about 9.5%. By our estimate, that cuts borrowing power by around 2% with each hike.

2. Property Prices

Cotality’s national index fell 1.1% in September, the sixth monthly fall in a row. Values are now 5.2% below the March peak, and for the first time in this downturn they’re no higher than a year ago.

Early estimates keep getting revised down. Our last edition reported July as a 0.7% fall, and it was later revised to 1.2%. August has now gone the same way, from a 0.9% fall to 1.2%. When fewer homes are selling, there’s less to measure, so September’s number may end up bigger too.

City	September	Past 12 months
Sydney	-1.4%	-7.0%
Melbourne	-0.7%	-6.2%
Brisbane	-1.5%	+5.9%
Adelaide	-1.3%	+6.5%
Perth	-1.2%	+10.1%
Hobart	-0.5%	+7.0%
Darwin	+0.4%	+11.9%
Canberra	-1.1%	-1.6%
Regional Australia	-0.7%	+5.6%
National	-1.1%	0.0%

Source: Cotality Home Value Index, September 2026

A few things stand out:

The strong markets have turned. Brisbane had the biggest fall of any capital in September. Adelaide and Perth fell more than 1% too, while Melbourne’s fall was milder than all three.
Sydney is still the weakest overall. Values are 8.6% below the February peak, which is slightly deeper than the same stage of the 2022-23 downturn. Melbourne is 7.2% below its high from November last year.
It’s almost everywhere. 97% of capital city suburbs recorded a fall over the past three months.
Buyers have stepped back. Cotality estimates sales over the past three months were 19.1% lower than a year ago. The biggest drops were in Brisbane (27%), Sydney (26%) and Perth (24%).
Houses are falling faster than units. Nationally, houses fell 1.2% in September against 0.8% for units.
Forecasters are expecting more. CBA sees national values falling around 9% from peak to trough, with the bottom sometime in 2027. Westpac expects a 6% fall this calendar year.

There’s a calmer view too. Cotality’s Tim Lawless says low unemployment and a shortage of new homes should help limit forced selling and a sharper crash. His most likely outcome is a gradual drift lower rather than a collapse, though he says the risks have shifted firmly to the downside.

3. Auctions

Last weekend’s preliminary clearance rate was 50.3%, the lowest in 10 weeks. There were 1,428 auctions across the capital cities, which is about 18% fewer than a year ago. Melbourne’s long weekend played a part in the low numbers, and its rate came in at 48.8%.

Be careful with preliminary figures, because they usually get revised down. The week before was first reported at 54.0% and finished at 49.1%. If the same thing happens again, last weekend will end up in the mid to high 40s.

Homes are also taking much longer to sell. The typical capital city home now takes 39 days to sell, up from 23 a year ago. New listings are 9.2% lower than a year ago, but the total number of homes for sale is up 23.1% because they’re not selling as fast.

4. Lending and Borrower Demand

The official ABS lending figures only come out quarterly, so there’s nothing new this month. The next release is in November. In the meantime, the best guide is Equifax, which tracks how many people are applying for loans.

Home loan demand in August was 14.1% lower than a year earlier. That’s slightly better than July’s 16.4% fall, but it’s still the fifth month of decline.

First home buyers: Down 20.1%, the biggest annual fall since 2022. The average first home buyer loan is still around $740,000, close to a record.
Investors: Down 11.4%.
Younger borrowers: Down more than 18% for people under 35, compared with 1.7% for people over 65.
Refinancing: Switching to a new lender is almost flat, while staying with your current lender and refinancing is down about 23%. People who shop around are still doing it.

Equifax’s Moses Samaha said we may be close to the bottom of this slowdown, but another rate rise could push it lower.

Tax and super changes for investors

These came in with the federal budget and aren’t new, but they’re shaping decisions, so here’s a quick summary:

Negative gearing: If you buy an established property after 7:30pm on 12 May 2026, you can’t use rental losses to reduce your other income from 1 July 2027. Properties bought earlier are grandfathered, and new builds are exempt.
Capital gains tax: From the same date, the 50% discount is replaced by indexation (adjusting your cost base for inflation) and a 30% minimum tax rate. The Budget tax explainer has the detail.
SMSFs: Since 10 August, self-managed super funds can’t take out new loans to buy residential property. Commercial property and cash purchases aren’t affected, and contracts signed before that date are protected.

5. Rentals

Rents are still climbing, just more slowly, and vacancy is creeping up. Cotality’s national vacancy rate hit 2.0% in September, up from a record low of 1.5% in February and the highest since January 2025. That’s still well below the 3.3% average before COVID. Hobart is the loosest capital at 3.0%, followed by Sydney at 2.3%, with Brisbane and Perth at 2.1%. Adelaide is the tightest at 1.4%.

Monthly rent growth slowed to 0.3%, the smallest rise since May 2025, bringing annual rent growth to 5.5%. Cotality’s number differs from SQM Research’s, which measures vacancy differently and still had it at 1.3% in August, with asking rents up 7.3%.

Because values are falling and rents are rising, rental yields keep improving. The national gross yield is 3.85%, the highest since August 2019, and ranges from 3.4% in Sydney to 6.5% in Darwin. But a higher yield doesn’t mean the property pays for itself. Cotality says opportunities for neutral or positive cash flow remain low once you count interest, insurance, maintenance and strata fees.

The AFMS Take

Rates are up and prices are down, which leaves less room for error than there was six months ago. The market isn’t falling apart, but it does reward people who are prepared.

If you have a home loan: A cheaper rate is still out there if you look beyond the big four. Rates go up on 9 October, so it’s worth reviewing your loan before then.

If you’re buying: You have more bargaining power than you did a year ago, but you can borrow less with each rate rise. Ask for your pre-approval to be tested against another 0.25%, as November is still possible.

If you’re an investor or SMSF trustee: The 12 May 2026 date and the residential borrowing ban change which purchases make sense. Work out the numbers using today’s rates and the post-2027 tax rules, not last cycle’s.

If you’re a first home buyer: Fewer people are competing with you, and that helps. Having your finance in order matters more than trying to pick the bottom.

If you’d like to talk through any of this, get in touch with our team.

Looking Ahead

9 October: The major banks’ rate increases take effect.
Mid-October: The next SQM vacancy and Equifax loan demand readings.
28 October: The September-quarter inflation figures are due.
2-3 November: The next RBA meeting.
November: ABS lending figures for the September quarter.

We’ll cover what matters in next month’s AFMS Mortgage Intelligence.

Sources

This article provides general information only and does not constitute financial or credit advice. Credit assistance is provided by Australian Financial & Mortgage Solutions Pty Ltd. Consider your individual circumstances and seek appropriate advice before making a decision about a home loan or property purchase.

Australian Property & Interest Rate Update: September 2026