Home Loan Trends 2026: What Australian Borrowers Need to Know
A comprehensive guide for Aussie homebuyers navigating interest rate uncertainty, digital mortgage innovation, and expanded government support programs
A comprehensive guide for Aussie homebuyers navigating interest rate uncertainty, digital mortgage innovation, and expanded government support programs
The Australian home loan landscape is entering a pivotal phase as we move into 2026. After three RBA rate cuts in 2025 brought the cash rate down to 3.60%, borrowers now face an uncertain outlook—with major banks split on whether rates will hold steady or rise again. Meanwhile, property prices continue climbing toward record highs across capital cities, while expanded government schemes are opening doors for first-home buyers.
Whether you’re a first-home buyer taking advantage of the expanded 5% deposit scheme, an investor eyeing the market, or an existing homeowner considering refinancing, understanding these trends is essential for making informed decisions.
Australian Interest Rate Outlook for 2026
The Big Four Banks Are Split
After three consecutive rate cuts in 2025 (February, May, and August), the outlook for 2026 has become increasingly uncertain. Here’s what Australia’s major banks are forecasting:
| Bank | 2026 Rate Forecast |
|---|---|
| ANZ | No change expected (hold at 3.60%) |
| Westpac | No change expected (hold at 3.60%) |
| Commonwealth Bank | +0.25% hike in February |
| NAB | +0.50% hike (February and May) |
| Citi | +0.50% hike (February and March) |
The divergence in forecasts reflects genuine uncertainty in the market. Commonwealth Bank and NAB are predicting rate increases after inflation ticked up again in late 2025, while ANZ and Westpac expect the RBA to hold steady.
Why the Uncertainty?
Several factors are pulling the RBA’s decision in different directions:
Upward Pressure on Rates:
- Inflation rose to 3.8% in the 12 months to October 2025, up from 3.6% in September
- Core inflation remains above the RBA’s 2-3% target band
- Strong property price growth is adding to household wealth effects
Downward Pressure on Rates:
- Economic growth remains sluggish
- Consumer spending is subdued despite rate cuts
- Mortgage stress levels remain elevated, with over a quarter of home loan holders at risk
What This Means for Your Mortgage
For borrowers on variable rates, the message from experts is clear: don’t count on further relief in 2026.
As Canstar’s data insights director Sally Tindall put it: “Borrowers with a mortgage should not plan for any further rate relief in 2026, and instead, start preparing for a potential hike, just in case one materialises later next year.”
Current Mortgage Rate Snapshot:
| Loan Type | Best Available Rate |
|---|---|
| Variable (Owner-Occupier P&I) | ~5.75% - 6.20% |
| 1-Year Fixed | ~5.50% - 5.90% |
| 3-Year Fixed | ~5.40% - 5.80% |
| 5-Year Fixed | ~5.60% - 6.00% |
Australian Property Market Forecast 2026
Record Prices Expected Across Capital Cities
Despite affordability challenges, property prices are forecast to hit new records across all major capitals in 2026. Here’s what the experts predict:
Domain Forecast 2026:
| City | House Price Growth | Median House Price |
|---|---|---|
| Sydney | 7% | $1,924,430 |
| Melbourne | 5% | Return to pre-pandemic highs |
| Brisbane | 5% | $1,190,000 |
| Perth | 7% | Above $1,000,000 |
| Adelaide | 4% | $1,110,000 |
| Hobart | 3% | Consolidation phase |
PropTrack Forecast: PropTrack predicts combined capital city house prices will rise 6-8% in 2026, pushing the median above $1 million for the first time in history.
SQM Research Scenarios:
| Scenario | National Growth |
|---|---|
| Base Case (most likely) | 6-10% |
| Sticky Inflation | 4-8% |
| Global Slowdown | 6-10% |
| Best Case | Up to 14% |
Units to Outperform in Key Markets
A notable trend for 2026 is the expected outperformance of units over houses in several cities, as buyers chase affordability:
| City | Unit Price Growth Forecast |
|---|---|
| Brisbane | 7% (strongest in country) |
| Adelaide | 5-7% |
| Perth | 5-7% |
| Sydney | 5% |
This reflects the reality that house prices in many markets have become unaffordable for average buyers, pushing demand toward more affordable dwelling types.
Key Drivers of the 2026 Market
Demand Factors:
- Expanded First Home Guarantee Scheme creating a surge in first-home buyer activity
- Help to Buy scheme launching with 10,000 places per year
- Strong investor activity returning (14% increase in investor loans in September quarter)
- Lagged effects of 2025 rate cuts still flowing through
Supply Constraints:
- Ongoing housing shortage estimated at 200,000-300,000 dwellings
- Building approvals still below required levels
- Construction costs and labour shortages persist
- Below-average listings as vendors hold back for higher prices
Headwinds:
- Affordability at historic extremes (100-year high price-to-income ratio)
- APRA likely to tighten macroprudential controls
- Potential rate hikes if inflation persists
- Slowing population growth (forecast ~365,000 in 2025-26, down from 662,000 peak)
FAQs
Credit card questions, answered
Will interest rates go up or down in 2026?
Major banks are split. ANZ and Westpac expect rates to hold at 3.60%, while CBA, NAB, and Citi predict rate hikes of 0.25% to 0.50% in early 2026.
Which city will see the biggest property price growth?
Sydney and Perth are forecast to see 7% house price growth, with Sydney's median expected to reach $1.92 million.
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