RBA Likely to Hold at 4.35% as Property Values Keep Sliding

NAB expects the cash rate to stay at 4.35% through 2026 as combined capital city prices fall for a third straight month and the August RBA meeting looms.

If you have been waiting for the Reserve Bank to deliver a rate cut, National Australia Bank has a clear answer for 2026: don't hold your breath. NAB has reaffirmed its forecast that the RBA will keep the cash rate on hold at 4.35% for the remainder of the year, even as housing values fall and buyer activity slows across most major cities.

Australian Broker reports that in NAB's latest Australian Forward View, the bank found the domestic economy had "lost some momentum through H1 2026", with business conditions easing back toward long-run averages after a stronger patch in late 2025.

For borrowers, the practical question is what a prolonged hold means right now — and whether the softening property market creates risks or opportunities worth acting on.

Capital City Prices Are Falling, and the Drop Is Broadening

Combined capital city dwelling prices fell for a third consecutive month in June, dropping 0.6% — the largest single-month decline since December 2022, according to NAB's analysis. That's not a blip. It's a trend that is now spreading beyond the markets that first showed weakness.

Sydney and Melbourne are expected to lead the falls, with NAB forecasting price declines of 6 to 7 per cent over the full year 2026. What's notable is that Brisbane and Adelaide — markets that had remained resilient for longer — are now also expected to record price falls in July, after what NAB's economists described as "a sharp change in momentum." The bank flagged that "risks are skewed to the downside, with the recent shift in momentum proving a bit sharper than anticipated."

Higher-value properties and houses, rather than units, are bearing the brunt of the pullback. NAB links this to three rate rises already delivered this year. That pattern matters if you are thinking about upgrading, or if your equity position has been sized against valuations from six months ago.

The auction market is telling the same story. Cotality head of research Tim Lawless noted that national auction volumes reached 1,421 for the week of 27 July 2026 — down 16.9% compared to the same week in 2025. The preliminary clearance rate of 52.4% was up 2.4 percentage points on the previous week, but that improvement largely reflects fewer vendors withdrawing properties rather than a surge in buyer demand: withdrawal rates eased from a recent high of 24% to 17.4%, though they remain well above 2025's weekly average of 11.8%.

Brisbane stands out as the weakest major market, with a clearance rate of just 30.5%, on track to finish below 40% for a ninth consecutive week. Sydney fared better at 56.1%, with 63.4% of successful sales settling before auction day — a sign that motivated buyers prefer to move privately rather than compete at auction. Melbourne produced 707 auctions for the week, up 18% on the prior week but still 10.1% below a year ago, with a clearance rate of 54.6%.

For anyone whose borrowing capacity or refinancing plans depend on recent valuations, now is a good time to check how your lender is approaching assessments in a softening market. You can also use our borrowing power calculator to run the numbers under current conditions before making commitments based on what the market looked like earlier this year.

The August RBA Meeting Is the Next Big Test

The next RBA board meeting falls on 10 and 11 August, and it will be closely watched. By then the board will have the Q2 CPI data in hand — due to be released on 29 July — alongside an updated Statement on Monetary Policy.

NAB expects headline inflation to come in at 4% year-on-year for the June quarter. That would sit well below the RBA's own May forecast of 4.8% year-on-year. The bank's economists also anticipate a trimmed mean reading of 0.9% quarter-on-quarter. If those numbers land as expected, they would represent genuine progress on the inflation front — the kind of result that opens a path to future rate cuts, even if the RBA does not move in August itself.

The labour market gives the RBA additional room to wait. Unemployment held at 4.4% in June, but NAB expects it to drift up to 4.6% by year-end and toward 4.8% by late 2027 as job vacancies and hiring intentions soften. That trajectory is consistent with a central bank staying on hold rather than tightening further.

That said, Governor Michele Bullock has been explicit that nothing is ruled out. "If inflation doesn't behave as expected, we might have to do more... I'm just not ruling that out," she told the board. The caveat is deliberate: the RBA's credibility rests on not declaring victory on inflation prematurely.

What a Prolonged Hold Means for Your Mortgage

The hold-at-4.35% scenario has different implications depending on where you sit.

If you are on a variable rate, your repayments are unlikely to change before year-end on NAB's base case — but you are also not getting relief soon. This is a sensible window to check whether your current rate remains competitive. Our refinance savings calculator can show you what a better rate could deliver over the life of your loan.

If you are thinking about buying, the softening price environment may be working in your favour — particularly for houses in Sydney or Melbourne, where falls are projected to be most significant. Lower prices do not automatically mean easier borrowing if lenders are adjusting their serviceability approach to reflect valuation shifts, but the affordability equation is shifting compared to where it stood at the start of the year.

If you own an investment property, the combination of weaker price growth, higher rates, and incoming changes to negative gearing and capital gains tax is already reshaping the market. If you have not reviewed your portfolio's financing recently, it may be time to look at investor home loan options to make sure your structure still makes sense.

If you are on a fixed rate approaching expiry, NAB's hold forecast provides useful context for your planning. Moving back to variable now carries less timing risk than it would in a rising-rate environment, but the right decision depends on your loan size, circumstances, and how long your fixed period has remaining.

Q2 inflation data lands this week and will significantly sharpen the picture. The August meeting will then tell us a great deal about the direction of rates into 2027.

Australian Broker reports on NAB's latest Australian Forward View.