Your monthly update on interest rates, lending and the Australian property market.
Data current to 28 August 2026.
At a Glance
- The RBA has held the cash rate at 4.35% following three rate increases earlier this year.
- Australian dwelling values fell 0.7% in July, with Sydney, Melbourne, Brisbane and Adelaide all declining.
- Auction conditions remain soft, giving buyers more negotiating power than this time last year.
- Investor lending fell sharply, while owner-occupiers and first home buyers proved more resilient.
- Rental markets remain tight, with the national vacancy rate sitting at just 1.3%.
The Headline
August has reinforced a clear change in Australia’s property and mortgage market.
Interest rates remain high, property values are falling across a broader range of cities and lending activity has slowed. At the same time, auction conditions have become more favourable for buyers and rental supply remains tight.
This doesn’t point to a property market collapse. It points to a market that has cooled considerably after a strong period of growth – and one where finance, property selection and price are becoming increasingly important.
Here are the numbers that stood out this month.
1. Interest Rates: RBA Holds at 4.35%
The Reserve Bank left the cash rate unchanged at 4.35% in August after increasing rates three times earlier this year.
Inflation remains above the RBA’s 2-3% target, and the Bank has made it clear that further tightening remains possible if inflation proves more persistent than expected. The RBA’s August forecasts don’t expect inflation to return to the middle of its target range until early 2028.
Will interest rates go down?
There is currently no certainty that the next move in interest rates will be down.
In fact, expectations have shifted following the latest inflation data. Three of Australia’s four major banks, being CBA, NAB and ANZ, now expect the RBA to raise the cash rate again before the end of 2026. NAB sees a potential increase as early as September, while CBA and ANZ currently expect a November increase. Westpac does not currently forecast another rise this year.
The RBA itself has also kept the possibility of further rate increases open. Minutes from its August meeting showed Board members discussed whether another increase could be required if inflation risks remained elevated.
For borrowers, this means it probably isn’t sensible to base a refinancing or home loan decision purely on the assumption that rates will fall soon. The better question is whether your current loan, rate and structure are competitive today.
When is the next RBA meeting?
The RBA’s next Monetary Policy Board meeting will be held on 28-29 September 2026, with the interest-rate decision announced at 2:30pm AEST on 29 September.
2. Property Prices: The Slowdown Is Spreading
Cotality’s Home Value Index fell 0.7% nationally in July, the largest monthly decline since December 2022.
Market | July Change |
Sydney | -1.4% |
Melbourne | -1.2% |
Brisbane | -0.6% |
Adelaide | -0.2% |
Perth | +0.1% |
Hobart | +0.1% |
Darwin | +0.8% |
Combined regional markets | -0.2% |
The important development is that weakness is no longer confined to Sydney and Melbourne. Brisbane and Adelaide, two of Australia’s strongest markets in recent years, have now also moved into decline.
Sydney property market: August 2026
Sydney remains one of Australia’s softer housing markets, with dwelling values falling 1.4% in July, the largest monthly decline of any capital city in Cotality’s latest Home Value Index.
Buyer demand is also noticeably weaker than a year ago. Sydney’s auction clearance rate was 50.3% for the week ending 23 August, compared with 71.6% at the same time last year, while auction volumes were down around 35%.
For buyers, that combination of falling values and softer auction competition is creating more negotiating room, although well-located, high-quality properties can still attract strong competition.
3. Auctions: Buyers Have More Negotiating Power
Auction results tell a similar story.
For the week ending 16 August, the combined capital city clearance rate finished at 48.9%, compared with 69.8% a year earlier.
Melbourne recorded a final clearance rate of 52.9%, while Sydney finished at 47.1%.
That means fewer than half of reported capital-city auctions resulted in a sale during the week.
Good properties can still perform strongly, but overall conditions are giving buyers more breathing room than they had a year ago. Passed-in properties can also create opportunities for negotiation immediately after auction.
4. Lending: Investors Pull Back Sharply
The latest ABS data showed the value of new housing loan commitments fell 5.2% during the June quarter.
The biggest decline came from investors:
Borrower | Quarterly change in loan value | Annual change |
Total housing | -5.2% | +6.8% |
Owner-occupier | -1.8% | +6.0% |
Investor | -10.2% | +8.1% |
First home buyer | +0.2% | +10.0% |
Investor commitments fell sharply as higher borrowing costs, serviceability requirements and changing market conditions affected demand.
First home buyers were considerably more resilient, with the value of new commitments actually rising slightly during the quarter.
Average loan sizes nationally were approximately $731,000 for owner-occupiers and $708,000 for investors.
5. Rental Supply Remains Tight
Despite weaker investor lending and softer property prices, Australia’s rental market remains undersupplied.
SQM Research recorded a national vacancy rate of 1.3% in July, unchanged from June.
There were approximately 40,771 vacant rental properties nationally, up from 37,863 a year earlier, while five capital cities continued to record vacancy rates below 1%.
National advertised rents were also approximately 7.2% higher than a year ago.
For investors, this creates an interesting contrast: property prices and investor borrowing are weakening, while rental supply remains tight.
That doesn’t make every investment attractive. Interest costs, rental income, expenses, tax, property quality and long-term growth prospects still need to be assessed together.
The AFMS Take
If we had to summarise the current market, it would be:
Cooler, but not collapsing.
Higher interest rates are clearly affecting borrowing capacity and buyer confidence. Property prices are adjusting, lending has slowed and auction results show vendors don’t have the same negotiating power they had previously.
But rental markets remain tight, first home buyers are still active and quality properties continue to sell.
For buyers, this may create better negotiating conditions.
For existing borrowers, the important question is whether your current interest rate and loan structure remain competitive.
And for investors, purchases need to make sense using today’s borrowing costs — not assumptions based on the market of several years ago.
The opportunity in a changing market isn’t necessarily about trying to pick the exact bottom. It’s about having your finance organised, understanding your numbers and being ready when the right property or lending opportunity presents itself.
Looking Ahead
The RBA’s next monetary policy decision will be announced on 29 September, with inflation, employment and spending data likely to remain important.
We’ll break down the developments that matter in next month’s AFMS Mortgage Intelligence.
Sources
- Reserve Bank of Australia – Monetary Policy Decision, August 2026
- Reserve Bank of Australia – Statement on Monetary Policy, August 2026
- Reuters – Major Australian Bank Interest Rate Forecasts, 27 August 2026
- Cotality – Home Value Index, July 2026
- Cotality – Auction Market Results, August 2026
- Australian Bureau of Statistics – Lending Indicators, June Quarter 2026
- SQM Research – National Vacancy Rates, July 2026
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.