House price falls barely ease mortgage pain as rates climb

• Combined capital house prices have fallen about $81,000 from their peak, but estimated monthly repayments are down just $10, Domain analysis shows.
• Sydney buyers face estimated repayments of $8,211 a month, above the level at the city’s December 2025 peak, despite a 7.9 per cent price fall.
• Prices would need to fall another 9.8 per cent across the combined capitals for repayments to sit 10 per cent below their peak.

Australian home buyers are getting little relief from falling house prices, as higher borrowing costs offset much of the benefit and keep mortgage repayments close to their peak.

Combined capital house prices have fallen about $81,000, or 6.2 per cent, from their March 2026 peak, yet estimated monthly repayments are down just $10, or 0.2 per cent, to $6,063, according to new analysis from property marketplace Domain.

Buyers need $16,289 less for a 20 per cent deposit across the combined capitals, but estimated repayments are now higher than at the peak in Sydney, Melbourne and Canberra.

The figures show the downturn is cutting the upfront cost of buying but barely denting the cost of repaying a loan, even after house prices fell across every capital in the September quarter for the first time in 15 years and only the second time on record.

“Comparing the monthly repayments required at each city’s price peak with those required today shows just how much borrowing costs have offset falling prices,” Domain chief residential economist Dr Nicola Powell said.

“In some cities, buyers are actually paying more each month to service a mortgage on a cheaper home.”

Sydney house prices are 7.9 per cent below their December 2025 peak, cutting the deposit required by $28,612, yet estimated monthly repayments have edged up 0.2 per cent to $8,211, from $8,195.

Melbourne repayments have climbed 1.5 per cent despite a 6.7 per cent price fall, while Canberra’s are up 1.9 per cent after a 4.3 per cent drop from its March 2026 high.

Perth recorded the steepest fall from its peak at 8.0 per cent, with repayments down just 2.1 per cent, while Brisbane’s fell 3.9 per cent, or $231 a month, partly because only one rate rise came between its June 2026 peak and the September quarter.

Subscribe here for our FREE Tuesday and Thursday newsletter

Email address

Subscribe

Adelaide, Hobart and Darwin recorded modest repayment declines of between 1.0 per cent and 1.5 per cent.

Falling house prices were making it “cheaper to buy, but not necessarily more affordable to borrow”, Dr Powell said, as higher interest rates mean the cost of servicing a mortgage “has barely changed.”

The ability to service a mortgage has changed far less than the deposit required, with Dr Powell warning, “a household unable to meet a lender’s serviceability requirements at the peak may be little better placed today, all else being equal.”

How much further would prices need to fall?

A meaningful improvement in mortgage affordability would require either lower borrowing costs or further price falls, Domain said.

For repayments to sit 10 per cent below their peak, combined capital prices would need to fall another 9.8 per cent, including 10.2 per cent in Sydney and 11.4 per cent in Melbourne.

Canberra would need the biggest further fall at 11.7 per cent, while Brisbane is closest at 6.3 per cent, and Adelaide, Perth, Hobart and Darwin would need falls of between 8.1 per cent and 9.1 per cent.

“These are not forecasts of future house prices, but they show how much higher borrowing costs have changed the affordability equation,” Dr Powell said.

The analysis uses September-quarter borrowing costs, before the Reserve Bank of Australia (RBA) lifted the cash rate to 4.85 per cent on Tuesday, its fifth rise this year.

Domain’s estimates assume a 20 per cent deposit and a 30-year principal-and-interest loan at the RBA’s average rate on new owner-occupier loans, and exclude stamp duty and conveyancing fees.

Further increases remain a risk with inflation still elevated, the platform noted, and Dr Powell said any further rise in mortgage rates “would mean prices need to fall further to deliver the same improvement in affordability.”