A single earner can borrow $35,400 less than they could in January, and a couple $70,800 less, according to Canstar's analysis of the effect of this year's three rate rises. Over the same period national home values have fallen, but not by that much.
That gap is the reason the correction now running through Australian housing has not turned into an opening for first home buyers.
Canstar attributes the reduction to three Reserve Bank increases. February took $12,200 off a single earner's capacity and $24,400 off a couple's. March took a further $11,800 and $23,600. May took $11,400 and $22,700. The cash rate now sits at 4.35 per cent, with the board meeting on Monday and Tuesday and publishing its next decision at 2.30pm on 11 August.
Set that against the price side. Cotality recorded a 0.7 per cent fall in national home values in July, the steepest monthly drop since December 2022. NAB's August Housing Monitor has Sydney values 5.1 per cent below their recent peak and Melbourne 5.3 per cent, with Brisbane down 0.4 per cent and Perth 0.7 per cent.
On a Sydney house near the median, a 5.1 per cent fall is worth considerably more than $35,400. The problem for a buyer without equity is that the discount is only useful if a bank will still lend against it, and the same rate rises that produced the discount are what cut the loan.
“A cheaper price tag doesn't necessarily mean a more affordable home if your borrowing capacity has been cut at the same time," Canstar data insights director Sally Tindall said. She described the effect as one step forward and one step back.”
NAB forecasts, which are forecasts rather than recorded data, put a further fall of about 5 per cent across the capitals over the rest of 2026. The bank projects Sydney's median falling roughly 10 per cent by December to $1,452,024, drops of $30,754 in Adelaide, $28,380 in Brisbane and $17,200 in Perth, and Hobart finishing the year the cheapest capital at $807,260.
Buyers who do not need a mortgage are unaffected by any of this. So are buyers whose deposit comes from somewhere other than savings.
Grace, a 29-year-old buyer looking around Wollongong, told SBS News that "massive mortgage repayments are still a huge barrier", and that the harder problem was bidding against people with clearly more money than her from the bank of mum and dad. That is the mechanism a correction does not touch. When credit tightens, the share of the market that does not depend on credit gets larger, and cash and inherited deposits buy more of the stock than they did before.
None of that is a story about one policy. Investor tax treatment, a supply pipeline that has not kept pace, and the sequencing of population growth against housing completions are all operating at once, and a rate cycle moves across the top of them. The reform option of capping negative gearing at a single investment property, rather than abolishing it or leaving it untouched, sits in that space and gets discussed less than the binary does.
Inflation was 3.8 per cent through the year to June, which is what the board is weighing on Tuesday. A cut would give some borrowing capacity back. It would give it back to everyone bidding at the same auction, including the investors and the upgraders, which is the part of the affordability equation that a rate decision cannot fix in either direction.
