RBA holds cash rate as home values heat up

The Reserve Bank has kept the cash rate on hold at 3.60 per cent, resisting pressure to cut despite growing signs that Australia's property market is heating up at its fastest pace in two years.

The decision, widely anticipated by 86 per cent of economists, comes as new CoreLogic data shows national home values rose 1.1 per cent in October, adding nearly $54,000 to the average Australian dwelling since rates began to fall earlier this year.

The surge highlights a sharp rebound in housing demand, with a chronic shortage of listings, surging investor activity, and new federal incentives combining to turbocharge the market.

CoreLogic research director Tim Lawless said the strength was being driven from the bottom up.

"Stronger housing demand at the lower price points is likely a culmination of serviceability constraints eroding purchasing power, persistently higher than average levels of investor activity, and what is likely a pick-up in first home buyers taking advantage of the expanded deposit guarantee," Lawless said.

Big city prices climb again

In Sydney, home values rose 0.6 per cent in October, bringing annual growth to 6.3 per cent and pushing the median house value to $1.58 million.

BresicWhitney CEO Thomas McGlynn said of the rate hold and price surge: "The reality is that Sydney needs more movement on interest rates to unlock the next phase of growth. This has become clearer with each rate cut over 2025, in which short-term boosts have delivered little sustained momentum."

"In lieu of any immediate uptick today to sentiment or affordability, it's certain that the present conditions will remain for the coming weeks and months with some buyers also pausing their plans until next year.

"The current landscape will continue to be a mixed picture, with healthy competition for homes up to $2 million driven by first-home buyers and investors, but significant constraints in the middle market.

"Despite October being a record month for sales across Sydney's lifestyle markets (BresicWhitney sales increased 38% year-on-year), the appetite for buyers to extend themselves isn't as deep as in previous cycles. Properties between $3 million and $6 million are where we see the highest concentration of owners with substantial mortgages, meaning interest rates play a larger role in their purchasing decisions. We believe a new dynamic may emerge through 2026 where it's easier to invest or enter the market than it is to upsize within it, until longer-term change is a reality in Sydney.

"With strong price growth present across other capital cities and the jump in inflation, it's highly possible that the holding of rates over the short-term will see Sydney constrained by national monetary policy. This will influence activity and decision-making over the first half of 2026. It's clear that a lack of affordability is starting to limit growth in Sydney, with annual growth in values below the national average."

Melbourne gained 0.9 per cent for the month and 4.9 per cent so far this year, taking its median to just under $974,000.

Smaller capitals led the gains, with Perth up 1.9 per cent, Adelaide 1.4 per cent and Darwin 1.3 per cent, reflecting strong interstate migration, tight supply and better affordability than the east coast.

Rate hold piles pressure on borrowers

Finder's head of consumer research Graham Cooke said today's RBA decision leaves borrowers without immediate relief.

"This time last month there was plenty of optimism for a rate cut in November - that's largely evaporated," Cooke said.

"The RBA wants to see inflation between 2 and 3 percent, and it just edged above the top threshold. The RBA will want to see that number trending down again before relieving any more cash rate pressure."

Saul Eslake from Corinna Economic Advisory said higher-than-expected September quarter inflation had "dealt a fatal blow" to any hopes of a Cup Day cut, while Monash University's Mark Crosby said there was "no case" for easing.

Mathew Tiller, Head of Research and Business Intelligence at LJ Hooker, said while new listings have lifted towards the end of the year, they are still below average creating strong competition between purchasers.

"It is not just mortgage-holders hoping for a rate cut today; many sellers have also been waiting on the sidelines, holding out for another reduction in the hope it will create more momentum," he said.

"Stable rates are a good thing as they provide buyers with some certainty to plan, and this keeps enquiry levels strong. It can be tempting to time selling your property with a rate cut, however, there are plenty of reasons to go to market now.

"Prices continue to edge higher, increasing month on month. Buyers are motivated as we head into summer, particularly families looking to lock in a new home before the start of the new school year. Investor activity is also busy as yields stay firm and vacancy remains tight."

Still, two in three experts (66 per cent ) expect at least one rate cut within the next 12 months, though most tip it won't arrive until early 2026.

Alcove's Chris Bates believes that with another decision again on 9 December, it is now more a question of whether they will hold again and wait until 18 February 2026.

"By this time, a lot of new information will come in to inform their decision on the trajectory of rates going into 2026, and the property market will have a few weeks of action to factor in."

Homeowners under strain

Finder's Consumer Sentiment Tracker shows more than one in three (36 per cent) homeowners struggled to meet mortgage repayments in October.

Cooke said borrowers should consider refinancing rather than waiting for the RBA.

"Even trimming half a percentage point off your home loan could save you thousands of dollars a year," he said.

"A number of lenders are also offering cashback, up to $4,000, for refinancing, which could be worthwhile for some borrowers looking for a cash injection."

With the spring selling season drawing to a close and home values climbing for a tenth straight month, Australia's housing market appears to be defying gravity, even as affordability worsens.

As Lawless summed it up: "The market is clearly responding to a mix of improved sentiment, government support, and limited supply. Unless those fundamentals change, it's difficult to see the current growth trend slowing any time soon."