RBA Governor Michele Bullock says the board still faces “difficult decisions” on interest rates, even as financial markets now price an 82% chance the cash rate holds at 4.35% when the board meets on 11 August. The gap between what the Governor is signalling and what the market expects sets up the most consequential week of the year for anyone on a variable rate. It lands alongside a property downturn that has now reached four of five mainland capitals, a mortgage market where inquiry volumes have fallen 12.5% in a year, and a hard deadline on SMSF property lending landing within days.
Will the RBA Raise Rates Again on 11 August?
The Reserve Bank’s Monetary Policy Board meets on 10 and 11 August, its first decision since holding the cash rate at 4.35% in June. Speaking to the Anika Foundation on 28 July, Bullock said the board “is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed” The Adviser. She added that if inflation does not keep easing, “the board have some difficult decisions to make in terms of raising interest rates.”
Markets are less cautious than the Governor. RBA Rate Watch’s tracking of ASX interbank futures puts the probability of a hold at 82% five days out from the meeting RBA Rate Watch. CBA, NAB and ANZ have all pencilled in a hold, while Westpac remains the only major bank still forecasting a hike this cycle. Bullock separately noted the housing market had eased “by more than we had anticipated” since May, a comment that sits awkwardly next to any case for tightening further.
Lender behaviour is sending its own signal. Macquarie became the 28th lender to trim variable pricing for new customers since June when it cut rates on 1 August Australian Broker. A borrower watching Tuesday’s decision is really watching two signals pull in different directions: a regulator not yet ready to close the door on a hike, and a lending market already behaving as though the cycle has peaked.
A hold keeps the cash rate unchanged, so it does not reduce standard variable repayments by itself. Any reduction depends on individual lenders choosing to cut their own rates, something several have already done this year independent of the RBA, driven more by competition for new customers than by any cut passed through from Martin Place.
How Deep Is Australia’s Property Price Downturn Right Now?
Cotality’s national Home Value Index fell 0.7% in July, the sharpest single-month drop since December 2022 Broker Daily. Brisbane and Adelaide have now joined Sydney and Melbourne in outright decline, leaving Perth as the only capital still recording a monthly gain, up 0.1%.
Auction results tell a similar story. Cotality’s data shows the combined capital city clearance rate at 53.6% in early August, a three-week high, but still the tenth straight week below the 55% level that typically signals a balanced market Cotality. The major banks have separately flagged that a sharper-than-expected downturn is underway The Adviser, and KPMG now forecasts a national price correction before a rebound in 2027 Australian Broker.
For a buyer negotiating right now, a soft clearance rate and falling values can translate into more room to negotiate and less competition at auction. A seller, meanwhile, is looking at longer selling times than the market has seen in years. Neither outcome applies everywhere, since a national index says little about any single suburb and local conditions vary sharply within and between capital cities.
Why Building Costs and Rising Listings Could Limit How Far Prices Fall
Not every signal points the same direction. Ray White’s chief economist says surging construction costs are putting a floor under the downturn, because replacement cost still sets a lower limit on what new housing can be built and sold for Australian Broker. That matters most in growth corridors where new-build supply, rather than established resales, sets local pricing.
Supply itself is also shifting. National for-sale listings have surged past 279,000, the strongest annual growth in stock levels in over a year, giving buyers more choice than they have had for some time Australian Broker. NSW has separately passed a building reform bill that consolidates development approvals and formally recognises modular construction for the first time, a change aimed at getting new supply to market faster Australian Broker.
Taken together, the market is being pulled in two directions at once. Falling values and soft clearance rates point one way. Rising listings and an expensive construction cost base point the other. Where any individual property or suburb lands between those two forces depends heavily on what is happening locally, not on the national headline.
Mortgage Demand Is Falling Fast, and So Are Loan Sizes
Equifax’s Q2 2026 Consumer Pulse, published 4 August, shows mortgage inquiry volumes swinging from 3.7% above year-earlier levels before May’s budget and rate rise to 12.5% below afterward The Adviser. First home buyer inquiries fell 15% over the same post-reform period, a sharper drop than the market overall.
Average loan sizes are shrinking too. National average mortgage inquiry values fell $8,000 between March and June, with Brisbane down $15,000, Sydney down $12,000 and Melbourne down $11,000. Perth was the only capital where inquiry values rose, consistent with it being the only capital still recording price growth.
The same data shows mortgage hardship accounts up 5.3% and non-mortgage hardship up 5.6% over the quarter, with Victoria recording the highest hardship rate nationally at 0.78%. Smaller loan sizes and falling inquiry volumes read as weaker demand, but for a buyer still active in the market, a six-figure drop in typical loan size in parts of Sydney and Melbourne can also mean less competition for the properties they are considering.
The SMSF Property Loan Ban Takes Effect This Week
The ban on new limited recourse borrowing arrangements, the mechanism self-managed super funds use to borrow for residential property, reaches its effective cut-off around 10 August. Broker reporting this week shows SMSF property appetite has held up as trustees and their advisers adjust strategy ahead of the deadline rather than abandoning the structure altogether Australian Broker.
Existing arrangements, and loans already in progress with an exchanged contract, remain grandfathered under the legislation. For a trustee with a purchase part-way through, confirming settlement timing with a lender and broker in the next few days is the practical priority, since arrangements without an exchanged contract before the cut-off will not proceed under the current structure. SMSF lending is not disappearing, but the specific pathway for new residential purchases is closing.
Because SMSF borrowing sits at the intersection of superannuation law, tax treatment and lending policy, trustees weighing a purchase against this deadline are generally better placed seeking specific advice from their accountant or financial adviser than relying on general commentary about the ban.
What the Revised Trust Tax Carve-Outs Mean for Property Investors
Treasury has released draft changes to the federal tax overhaul that add new carve-outs for widows, trusts and new housing, responding to months of industry pushback on the original proposal to tax discretionary trust distributions at 30% The Adviser. The MFAA has continued pushing for further changes, warning the current draft could still penalise legitimate business and investment structures without additional carve-outs The Adviser.
For property investors who hold or are considering holding through a trust structure, the practical detail of what qualifies for a carve-out, and what does not, is still moving. Because trust taxation interacts directly with individual financial and estate planning circumstances, this is a case where speaking with an accountant or solicitor about a specific structure is far more useful than a general summary of draft rules.
The timing matters for anyone part-way through setting up a purchase structure. A trust that looked straightforward under the original 30% proposal may land in a different position once the final carve-outs are legislated, and the draft stage is exactly when that detail is still open to change.
Key Takeaways
- The RBA’s 11 August decision is finely balanced: markets price an 82% chance of a hold at 4.35%, but Governor Bullock has not ruled out a further hike if inflation does not keep easing.
- National home values fell 0.7% in July, the sharpest monthly drop since December 2022, with Brisbane and Adelaide joining Sydney and Melbourne in decline while Perth remains the only capital still positive.
- Rising construction costs and a surge past 279,000 national listings are pulling against the downturn from opposite directions, keeping the outlook mixed rather than one-directional.
- Mortgage inquiry volumes are down 12.5% year-on-year and average loan sizes have fallen by up to $15,000 in Brisbane, even as mortgage hardship accounts rose 5.3% over the quarter.
- The SMSF residential property loan ban reaches its effective cut-off around 10 August, though existing arrangements and exchanged contracts remain grandfathered.
- Draft carve-outs for widows, trusts and new housing are still moving through Treasury, making this a moment to seek specific advice rather than rely on the original 30% trust tax proposal.