Has the RBA Already Wiped Out the Home Ownership Gains from Tax Changes? — 2026 Analysis

Quick answer: Rate cuts have improved borrowing power on paper, but surging property prices — partly fuelled by those same cuts — have largely cancelled out the affordability benefit for first-home buyers. Whether you're better or worse off depends heavily on when you started saving and what market you're buying in.

The Reserve Bank of Australia (RBA) has cut the cash rate multiple times through 2025 and into 2026, and the Stage 3 tax cuts that took effect from 1 July 2024 put more money in workers' pockets. Both were supposed to make home ownership more achievable. For many Australians, though, the maths hasn't worked out that way. Property prices have surged in the same window, and the uncomfortable question being asked now is: did the RBA's own rate-cutting cycle undo the very affordability gains those tax changes were meant to deliver?

This piece works through the numbers honestly — what borrowing power gains looked like, how much property prices moved, and what today's first-home buyer is actually facing compared to 18 months ago.

What the Tax Changes Actually Delivered

The Stage 3 tax cuts, which were redesigned in early 2024 and took effect from 1 July 2024, delivered meaningful after-tax income boosts across a wide range of income bands. The biggest relative winners were middle-income earners — those earning between $45,000 and $135,000 a year — who saw the 32.5% tax bracket drop to 30% and the upper threshold of that bracket rise significantly.

Here's a simplified view of the approximate annual tax saving by income level:

Taxable Income	Annual Tax Saving (approx.)
$40,000	~$650
$60,000	~$1,290
$80,000	~$1,679
$100,000	~$2,179
$120,000	~$2,679
$135,000	~$3,729

For a couple both earning $80,000, the combined saving is roughly $3,358 per year — or about $280 per month. That's not trivial. Over three years of saving, a couple could accumulate an extra $10,000+ toward a deposit.

But here's the critical point: deposit savings and borrowing power are two different things, and property prices affect both.

How Rate Cuts Changed Borrowing Power

When the RBA began cutting rates in early 2025, lenders responded by reducing their home loan rates. The cash rate moved from 4.35% (where it had been held through late 2023 and most of 2024) down through a series of cuts. By mid-2026, the cash rate sits significantly lower, and typical variable home loan rates have followed.

The relationship between interest rates and borrowing capacity is direct: lower rates mean a lender calculates you can afford a larger monthly repayment on the same income, so they'll extend a larger loan. The increase can be substantial.

To illustrate: a couple with a combined gross income of $160,000 and standard expenses might have had a maximum borrowing capacity of approximately $850,000 when rates were at their peak (around 6.5% average variable rate). With rates now around 5.3% on many lenders' standard variables, that same couple might be able to borrow closer to $980,000 — a gain of roughly $130,000 in purchasing power.

Use the Borrowing Power Calculator to run your own numbers based on current rates and your income situation.

That sounds like great news. And it is — in isolation. The problem is that every other buyer in the market received the same upgrade to their purchasing power simultaneously.

What Happened to Property Prices

Here's where the analysis gets uncomfortable. Property markets across Australia's major cities responded sharply to the shift in rate expectations — not just to actual cuts, but to the anticipation of cuts — from mid-2024 onwards.

The mechanism is straightforward: when buyers can suddenly borrow more, they bid more. When that happens across the whole market at once, prices rise to absorb the new purchasing power. This is a well-documented pattern in Australian property markets and has played out in recognisable form before — most notably after rate cuts in 2019 and again in 2021.

Illustrative national median price movements:

City	Approx. Median (Jan 2025)	Approx. Median (Sep 2026)	Change
Sydney	$1,100,000	$1,235,000	+$135,000 (~12%)
Melbourne	$760,000	$810,000	+$50,000 (~6.6%)
Brisbane	$820,000	$920,000	+$100,000 (~12.2%)
Perth	$730,000	$850,000	+$120,000 (~16.4%)
Adelaide	$680,000	$760,000	+$80,000 (~11.8%)

Note: These figures are illustrative estimates based on publicly available trend data and are used for educational purposes. Actual median values vary by source and suburb — always check CoreLogic, Domain, or the ABS for current verified data.

In Sydney, prices rose by roughly as much as the borrowing capacity gain our example couple received. In Perth and Brisbane, prices rose by more. In Melbourne, which underperformed, buyers may be marginally ahead — but only just.

The Deposit Problem: Prices Move Faster Than Savings

Borrowing capacity is only half the equation. To actually buy a home, you need a deposit — typically 10% to 20% of the purchase price to avoid lenders mortgage insurance (LMI).

Consider a first-home buyer saving for a $800,000 home in early 2025. They needed a $80,000 deposit (at 10%). By mid-2026, that same property category has risen to $900,000 in their market. Now they need $90,000 — an extra $10,000 they have to save while simultaneously trying to keep up with rising rents.

Even with the tax cut savings of $1,290 per year (on $60,000 income), the goalposts have moved faster than the savings rate can close the gap — especially for single buyers.

This dynamic disproportionately punishes people who are closest to, but not quite at, their deposit target. The closer you were to buying when prices started rising, the more the rug was pulled out.

First-Home Buyer Schemes: A Partial Buffer

The federal government's First Home Guarantee (FHG) and Help to Buy shared equity scheme (subject to rollout) do offer meaningful buffers for eligible buyers. The FHG allows qualifying first-home buyers to purchase with as little as 5% deposit without paying LMI, with the government guaranteeing up to 15% of the loan.

At a 5% deposit threshold:

A $800,000 home requires a $40,000 deposit
A $900,000 home requires a $45,000 deposit

That's a more manageable gap than the 10–20% LMI zone. However, the FHG has property price caps by city, and these caps haven't always kept pace with rapid price growth. In Sydney, the cap has been raised over time but can still exclude buyers from median-priced properties in desirable suburbs.

Important: FHG places are limited each financial year and operate on a first-come, first-served basis. Check the Housing Australia website for current caps and availability before planning your purchase.

The Serviceability Buffer: An Overlooked Constraint

Even if a buyer has the deposit and qualifies for the loan principal they need, APRA (the Australian Prudential Regulation Authority) requires lenders to assess borrowers at the loan interest rate plus a 3% serviceability buffer. This means if your actual rate is 5.3%, lenders must check you can afford repayments at 8.3%.

This buffer is designed to protect borrowers against future rate rises — reasonable prudence after the 2022–2023 rate-hiking cycle that left many households stretched. But it also limits how much of the "improved affordability" from rate cuts actually translates into approved loan amounts.

When rates were at their peak (say, 6.5%), the buffer rate was 9.5%. At 5.3%, it's 8.3%. That 1.2 percentage point reduction in the assessment rate does improve maximum loan sizes — but less dramatically than the headline rate cut suggests.

Who Has Actually Benefited?

To cut through the noise, it helps to identify which groups are genuinely better off versus those who've been left behind.

Existing Homeowners with a Mortgage

This group is clearly better off. Their loan balance is fixed (or declining), and lower interest rates directly reduce their monthly repayments — or allow them to pay the same amount and clear principal faster. The tax cuts add extra disposable income on top.

A household with a $600,000 mortgage seeing their rate drop from 6.5% to 5.3% saves roughly $460 per month in interest — nearly $5,500 per year. Combined with tax cut savings, this is a genuine and meaningful improvement in financial position.

Homeowners Without a Mortgage

They benefit from the tax cuts through extra disposable income, and they've also seen their asset appreciate in value. No downside here.

Renters Saving for a First Home

This is the group most exposed to the cruel maths described above. They're paying elevated rents (which have risen sharply in most cities), trying to save a deposit that keeps growing, and competing against buyers with expanded borrowing capacity. The tax cuts help at the margin, but the structural headwind is strong.

Property Investors

Investors benefit from lower borrowing costs, higher property values, and the Stage 3 tax savings on their personal income. Rental demand remains robust. This group has captured a disproportionate share of the affordability dividend.

Is There a Silver Lining?

It's not all pessimistic. A few genuine positives exist for aspiring first-home buyers:

1. Mortgage repayments are lower on the same loan size. Even if prices have risen, the monthly cost of servicing a given loan is cheaper. On a $700,000 loan, the difference between a 6.5% rate and a 5.3% rate is roughly $525 per month — over $6,000 per year. For those who can get into the market, ongoing costs are more manageable.

2. Fixed-rate options have become more competitive. Lenders are competing aggressively for new business, and fixed-rate products at 2–3 year terms are being offered at rates that would have seemed impossible in 2023.

3. Regional markets offer relative value. Not every market has surged equally. Some regional cities and outer suburban areas have seen more modest price growth while still benefiting from the improved borrowing environment. For buyers with location flexibility, real value can still be found.

4. Wage growth has been solid. Australia's wage price index has grown at a stronger clip over 2024–2025 than in the preceding decade. Higher incomes do compound over time to improve affordability — but this works slowly relative to the pace of price growth.

Running Your Own Numbers

Every buyer's situation is different. The affordability question isn't answered by national medians — it's answered by your income, your deposit, your target suburb, and the rate you can actually get approved for.

The Borrowing Power Calculator at Dolaro lets you enter your income, expenses, and loan term to see your estimated maximum borrowing capacity under current rate assumptions. It's a useful starting point before you approach a lender or mortgage broker.

For understanding how stamp duty affects your total upfront costs — a cost that also grows as property prices rise — the Stamp Duty Calculator covers all Australian states and territories, including first-home buyer concessions.

And once you're at the stage of comparing renting versus buying, the Rent vs Buy Calculator can help you weigh up whether the financial case for buying actually stacks up in your specific situation.

The Broader Policy Question

The interaction between monetary policy (RBA rates) and fiscal policy (tax cuts) in a supply-constrained housing market is genuinely difficult to get right. When you simultaneously increase buyers' after-tax income and their borrowing capacity, without a proportional increase in housing supply, the result is predictable: prices rise.

This doesn't mean either the tax cuts or the rate cuts were wrong in their own terms. The Stage 3 tax cuts reflected a prior legislative commitment, and the RBA's rate reductions were a response to easing inflation — not a housing policy tool. But the combined effect in the property market has been to give with one hand and take away with the other — at least for prospective first-home buyers.

The structural answer to housing affordability in Australia is supply. Until the number of homes being built keeps pace with population growth and household formation, every demand-side stimulus — whether lower rates, government grants, or tax cuts — risks being absorbed by higher prices rather than broader home ownership.

For now, aspiring buyers should go in clear-eyed: the affordability environment is better than it was at the peak of the rate cycle, but worse than headlines about rate cuts might suggest. Do your own modelling, use government schemes where you qualify, and don't assume that because rates are lower, a purchase necessarily pencils out in your market.

Frequently Asked Questions

Has the RBA actually made housing less affordable by cutting rates?

Not directly — the RBA's mandate is inflation and employment, not housing affordability. But by cutting rates, the RBA increases buyers' borrowing capacity across the whole market simultaneously. In a supply-constrained market, this tends to push prices up rather than simply making the same homes cheaper to finance. The net effect on affordability for new buyers is often close to neutral or even negative.

Do the Stage 3 tax cuts help first-home buyers get into the market?

They help at the margin. For a first-home buyer on $80,000 per year, the annual saving of roughly $1,679 is meaningful for deposit accumulation over time. But if property prices in their target area have risen by $80,000–$100,000 in the same period, the tax cut alone doesn't bridge the gap. It's a tailwind, not a solution.

Is now a good time to buy property in Australia?

This depends entirely on your personal circumstances — your income, deposit, job stability, target market, and long-term plans. Nationally, prices are elevated relative to incomes by historical standards. However, lower interest rates do make monthly repayments more manageable than they were in 2023. The Rent vs Buy Calculator can help you model whether buying makes sense for your specific situation.

How much does the serviceability buffer affect my borrowing capacity?

Significantly. APRA requires lenders to assess you at your actual rate plus 3%. So at a current rate of 5.3%, you're assessed at 8.3%. This means lenders approve you for less than you could theoretically afford at your actual rate. The buffer hasn't been removed despite rate cuts, which limits how much of the RBA's easing passes through to approved loan amounts.

Which Australian cities have seen the biggest price rises since rate cuts began?

Perth has been one of the standout performers, with strong population growth and limited supply combining with improved borrowing capacity to push prices sharply higher. Brisbane and Adelaide have also significantly outperformed. Melbourne has been more subdued by comparison, making it relatively better value — though it is still expensive by most global benchmarks.

Can first-home buyer government schemes fully offset the affordability problem?

They help meaningfully for eligible buyers, particularly the First Home Guarantee which allows a 5% deposit without LMI. However, the schemes have property price caps that can exclude buyers in the most expensive markets, and annual places are limited. They're a useful tool but not a complete solution to the structural affordability challenge.

Related Calculators and Guides

Borrowing Power Calculator — See how much you can borrow at current rates based on your income and expenses
Stamp Duty Calculator — Calculate upfront purchase costs including first-home buyer concessions by state
Mortgage Calculator — Model your monthly repayments at different loan sizes and interest rates
Rent vs Buy Calculator — Compare the true financial cost of renting versus buying in your market
Usable Equity Calculator — Existing homeowners can see how much equity they have available to draw on
Income Tax Calculator — Check your after-tax income under current tax settings including Stage 3 changes

Home loan interest rates and property price data are current as at September 2026 and change regularly — always verify the current figure before acting.

This article is for general information only and does not constitute financial, tax or legal advice. Individual circumstances vary. Consult a registered tax agent or licensed financial adviser before making decisions based on this information.