Three things matter to a first mortgage lender in any month: where property values sit against their peak, whether borrowers can still meet their payments, and what the cash rate is doing to both. June moved all three.
| Measure | Latest | Detail |
|---|---|---|
| Cash rate | 4.35% | Held on 16 June, after increases in February, March and May |
| Headline inflation | 4.0% | Year to May |
| Trimmed mean inflation | 3.6% | Year to May, the measure the Reserve Bank watches most closely |
| National home values | -0.4% | June, the steepest monthly fall in three and a half years |
| Sydney home values | -1.2% | June; about 3.7% below the recent peak |
| Next Reserve Bank decision | 11 August |
Where values sit.
Cotality’s index fell 0.4 per cent nationally in June. Sydney and Melbourne led the fall, down 1.2 and 1.0 per cent for the month. Sydney is now about 3.7 per cent below its recent peak, down 3.2 per cent over the quarter and roughly flat over the year, and estimated sales volumes are running about 17 per cent below a year earlier.
The sales figure matters as much as the price figure. Falling prices with steady volumes describe a market finding a new level. Falling prices with thinning volumes describe a market where fewer buyers are prepared to commit, which is the condition that stretches selling times.
The Reserve Bank.
The Reserve Bank held the cash rate at 4.35 per cent on 16 June, a unanimous decision after three increases this year took the rate up from 3.60 per cent. The May increase had been carried eight votes to one. The board said the disruption to global oil supply is feeding into inflation, and most forecasters did not read the pause as the end of the increases.
Headline inflation eased to 4.0 per cent in the year to May, from 4.6 per cent in March. Trimmed mean inflation went the other way, to 3.6 per cent, its highest reading this year. Underlying inflation rising while the headline falls is the combination that keeps a central bank cautious.
The Budget and investor demand.
The 12 May Budget restricts negative gearing for established residential properties bought after Budget night, and replaces the 50 per cent capital gains tax discount with indexation and a 30 per cent minimum tax rate from 1 July 2027. Properties held before Budget night are grandfathered, and new builds keep more of the existing treatment. The measures were announced subject to legislation.
Investor lending was already easing before the Budget: the number of new investor loans fell 5.3 per cent in the March quarter. For an investor buying an established dwelling from here, the after-tax cash flow is weaker than it was on 11 May, and borrowing capacity follows cash flow.
What this means for lending
Value the security on today’s evidence.
In a falling market the valuation is the most important number in a loan file, and the comparable sales behind it need to be recent. A valuation that leans on sales from the peak describes a market that no longer exists.
Lending at 65 to 70 per cent of an independent valuation leaves the borrower’s equity in front of the lender’s money. The useful question this month is how much of that buffer would be used if values kept falling at June’s pace for the life of a twelve month loan. As an illustration only: twelve months at Sydney’s June rate of fall would take about 13.5 per cent off values, which is between a third and a half of a 30 to 35 point equity buffer.
Sources.
- Cotality, Home Value Index, July 2026 release (data to 30 June 2026): national and capital city monthly changes; Sydney quarter, annual and from-peak changes; estimated sales volumes.
- Reserve Bank of Australia, Statement by the Monetary Policy Board, 16 June 2026; decision of 5 May 2026.
- Australian Bureau of Statistics, Consumer Price Index, Australia, May 2026.
- Australian Bureau of Statistics, Lending Indicators, March quarter 2026: new investor loan commitments.
- Australian Government, Budget 2026-27, 12 May 2026: negative gearing and capital gains tax measures, as announced and subject to legislation.
This commentary is general information only, prepared by Oxford Capital Pty Ltd (ACN 700 065 872). Oxford Capital Pty Ltd is the investment manager of the fund and a corporate authorised representative (CAR No. 1323556) of Non Correlated Advisors Pty Ltd ACN 158 314 982, AFSL 430126. It does not hold an Australian Financial Services Licence of its own. The trustee of the fund, and the issuer of units in it, is Non Correlated Capital Pty Ltd ABN 99 143 882 562, AFSL 499882. It is not financial product advice, does not take account of anyone’s objectives, financial situation or needs, and is not an offer or invitation to acquire any financial product. It reflects the author’s views at the date of publication, which may change. Figures are drawn from the sources listed and are subject to revision by the issuing agency. Nothing here is a forecast of the performance of any Oxford Capital fund.