For Australians considering buying a home, affordability in 2026 involves much more than having enough for a deposit. Property prices, interest rates, borrowing capacity and ongoing household expenses can all influence how affordable home ownership may be.
Interest rates have changed significantly this year. On 29 September 2026, the Reserve Bank of Australia (RBA) increased the cash rate by 0.25 percentage points to 4.60%. This was the fourth 0.25 percentage-point increase during 2026, taking the cash rate from 3.60% at the beginning of the year to 4.60%. The RBA cited elevated inflation and increasing inflationary pressures among the reasons for its latest decision.
Those pressures remain evident in household costs. The ABS reported annual inflation of 4.0% in August 2026, while housing costs increased 5.7% over the year.
Property prices also remain high. The ABS estimates the mean Australian dwelling price was $1,100,400 in the June quarter of 2026. There are substantial differences between states, ranging from $1,304,900 in NSW and $1,130,600 in Queensland to $918,400 in Victoria.
Borrowers are consequently taking on sizeable loans. In the June quarter, there were 81,626 new owner-occupier loan commitments worth $60.5 billion, including 29,319 loans to first-home buyers.
The interest rate attached to a mortgage can make a considerable difference. As a hypothetical example, a $700,000 principal-and-interest mortgage over 30 years would require monthly repayments of approximately $4,197 at 6%, $4,657 at 7% and $5,136 at 8%. These examples exclude fees and assume the interest rate remains unchanged.
Borrowing capacity is another consideration. APRA currently requires regulated banks to assess new mortgage borrowers using a minimum serviceability buffer of 3 percentage points above the loan interest rate. It also limits banks to having no more than 20% of new owner-occupier lending at debt-to-income ratios of six times or more.
A practical affordability checklist
When considering the potential cost of home ownership, some of the numbers that can help build a broader picture include:
- Deposit: How much is available after allowing for other purchase costs?
- Borrowing capacity: How much might lenders be prepared to provide?
- Mortgage repayments: What could repayments look like at different interest rates?
- Household cash flow: What income remains after regular living expenses and mortgage repayments?
- Existing debt: Are there credit cards, personal loans, car finance or other commitments?
- Upfront costs: What could stamp duty, conveyancing, inspections and lending costs add?
- Ongoing costs: What could council rates, insurance, maintenance and strata fees involve?
- Financial buffer: What accessible savings would remain after purchasing?
- Changing circumstances: How could changes to income, expenses or family circumstances affect the numbers?
- Interest-rate changes: What could repayments look like if mortgage rates were higher or lower?
There is no single figure that determines whether a property is affordable. Deposit size, income, debt, household expenses, ongoing ownership costs and possible changes in interest rates can all contribute to the overall picture.
Thinking about buying a home?
Before making one of life’s biggest financial commitments, understanding the numbers can help you see the bigger picture.
A financial review can help you understand your current position, explore the different factors that may affect your plans and identify the questions worth considering before you make any decisions.
If buying a home is something you’re considering, book a complimentary financial review with Finwell to better understand your current financial position and the factors that could influence your future plans.
Sources: Reserve Bank of Australia (RBA), Australian Bureau of Statistics (ABS) and Australian Prudential Regulation Authority (APRA).
This article contains general factual information only. It does not take into account any person’s objectives, financial situation or needs and does not constitute financial, credit, taxation or investment advice.
