Australia’s housing slowdown is now translating into serious financial stress for homeowners. Some vendors are unable to secure a sale, others face losses, and growing signs of distress are emerging at property auctions nationwide.
Property commentator Tom Panos said one auctioneer told him that six of the 10 vendors at weekend auctions had broken down in tears in their living rooms.
According to Panos, it is becoming increasingly common for distressed owners to have purchased new homes while being unable to sell their existing properties as prices continue to weaken.
“A lot of these people are in a situation where they’re beginning to think to themselves, this is becoming unmanageable,” he said.
“Property prices have dropped. Some of these people are going to be losing money on their assets as well.”
Panos warned that a fifth interest rate increase this year could push even more homeowners to breaking point. While some families face the prospect of selling at a loss, others are struggling to keep up with sharply higher mortgage repayments.
He said Australians were giving up holidays, abandoning private school plans and taking on second jobs in an effort to retain their homes.
The Reserve Bank’s fifth rate rise of the year has left homeowners facing an additional $584 a month in mortgage repayments, increasing the annual cost of a typical home loan by almost $7,000.
For an average $731,000 mortgage, every 0.25 percentage point increase has added about $114 to monthly repayments.
Prominent property commentator Tom Panos (pictured)
Tuesday’s rate rise decision was not unanimous, with Reserve Bank board members, led by Michele Bullock (pictured) split 6 – 3 on whether to lift rates
REIA’s latest Housing Affordability Report, covering the June quarter of 2026, found that average home-loan repayments absorbed 50.9 per cent of median family income
Panos said the economic consequences would extend far beyond individual homeowners.
Declining property transactions are also affecting mortgage brokers, removalists, tradespeople, conveyancers and state government stamp duty receipts, as well as many other businesses linked to the housing market.
“If we were to have one more rate rise, I would say the chances of a recession grow significantly,” he said.
“When there’s less transactions, a lot of people get impacted. Obviously, real estate agents get impacted, but there’s a whole ecosystem that feels the effects.”
“Most state governments have at least 20 per cent of their revenue coming from stamp duty.”
“You have this whole ecosystem that’s impacted, and that affects the Australian economy significantly.”
“What Australians want to hear is that’s the end of the rate rises, and that to me is the line in the sand that says that we begin a new cycle.”
Treasurer Jim Chalmers said the rate increase had been “widely expected”, but that did not make it any easier for Australian families and businesses to absorb.
Treasurer Jim Chalmers (pictured) said the rate rise was ‘widely expected, but that doesn’t make it any easier for Australian families and businesses to absorb’
‘It will be difficult news for many Australians who are already paying a hefty price for circumstances outside of their control,’ he said.
Compare the Market economic director David Koch said the burden on homeowners was becoming increasingly difficult to bear.
‘The Reserve Bank warned us that this could happen if inflation didn’t show some sign of stablising or easing – despite the fact that consumer confidence is almost at a record lows, business confidence is at record lows and unemployment is increasing,’ he said following Tuesday’s decision.
‘It is really hard to see is that homeowners are doing all the heavy lifting by shouldering these rate hikes, but to sympathise with the RBA – this is really the only lever they’ve got.
‘That’s why I think governments have got to get on board and start helping us fight inflation. They can’t just continue being their own island, spending up big and fueling demand. And that’s governments at all levels: local, state and federal.’
Meanwhile, new analysis from The Australia Institute claims the big four banks are making record profits as higher interest rates squeeze mortgage holders.
The think tank estimates that banks now make about $266,000 in profit over the life of an average owner-occupier home loan of $731,000, up $40,000 since rates began rising earlier this year.
‘While borrowers are struggling to make repayments, going backwards or, worse, losing their homes… the big four banks are cashing in on their misery,’ chief economist Greg Jericho said.
Compare the Market economic director David Koch (pictured) said the burden on homeowners was becoming increasingly difficult to bear
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‘The banks are doing nothing to ease the pain of customers. Rather than helping, they’re making it worse, scraping huge profits from people who are only trying to put a roof over their families’ heads.’
The analysis also found the major banks make an average profit of $12,200 in the first year of a new owner-occupier mortgage.
‘That’s not money to run a branch, operate an online banking system or even pay multi-million dollar salaries to executives, this is pure profit, on top of all that. It’s obscene,’ he said.
‘Right now, an average Australian family with an average loan from a big four bank is contributing $234 a week to their bank’s profit – more than a thousand dollars a month going straight to a company which consistently records multi-billion dollar profits while customers experience unprecedented pain.’
Mr Jericho said the RBA’s decision to lift interest rates again in November punishes people who are already being punished by their bank.
‘Ordinary Australians – particularly those under mortgage stress – are not causing inflation by spending too much. Inflation is being driven by the cost of fuel, caused by Donald Trump’s war in the Middle East, and corporate profits,’ he said.
‘This brutal decision by the RBA won’t fix inflation. But it will see many decent Australian families forced from their homes.’
Judo Bank chief economic adviser Warren Hogan said under a worst-case scenario, six more interest rate rises may be necessary, taking the cash rate beyond six per cent.
Buyers have alrgely abandoned the residential property market across the nation
He told ABC’s The Business interest rates may be too low to effectively combat inflation and said he was forecasting two further increases on top of the widely expected rate rise on Tuesday.
‘If inflation remains stubborn, who knows how high we’ll have to go,’ he said.
‘The worst case scenario for us would be having to get the cash rate up to where the RBA took it just before the (Global Financial Crisis) when we last had an inflation problem, and that was a cash rate of 7.25 per cent.
‘We’d definitely have a recession, there’s no two ways about that.’
When pressed about his comments, Reserve Governor Michele Bullock declined to say how high rates could climb and said the RBA would continue tightening monetary policy for as long as necessary.
‘Well, we will need to raise interest rates to the extent that we need to, to get inflation down,’ she said.
‘I don’t know how high that is. I know we’ve done five hikes this year, and that has still got another 12 months to play through. As I’ve already said, that still has another 12 months to play through.’
Bullock said economists remained divided over the future direction of the economy.
‘So, will we need more? I don’t know. Warren Hogan is one voice. There are other voices saying, actually, we’re heading into recession territory and we’re going to have to start dropping rates when we’ve overdone it.
‘One thing all these people have in common is that they are all entirely certain. I am not, and I admit that.
‘We do our best with our forecasts. We have to do forecasts because we don’t want to be backward-looking. We have to be looking forward. But they’re uncertain, and things change.
‘Back in February, we weren’t expecting a conflict in the Middle East. So things happen.
‘I’m not going to respond directly to the question of how high interest rates can go. I’d only say that we will do what we need to do to get inflation down.’
The RBA acknowledged the economy is slowing but argued persistent inflation and mounting global risks, including the war in the Middle East and rising oil prices, warranted another increase.
‘The economy is slowing, housing prices have fallen significantly and the unemployment rate has risen,’ the RBA said in its statement.
‘Employment is expected to continue to grow, but the unemployment rate is projected to rise by more than expected in the August forecasts.
‘Inflation is now forecast to remain elevated through much of 2027 and is not expected to reach the top of the 2–3 per cent target range until late 2027, around three quarters later than previously forecast.’
Those concerns are already showing up in the labour market with the latest figures from the Australian Bureau of Statistics showing Australia’s unemployment rate has reached 4.7 per cent, its highest level in five years.
Tuesday’s rate rise decision was not unanimous, with Reserve Bank board members split 6 – 3 on whether to lift rates.
REIA’s latest Housing Affordability Report, covering the June quarter of 2026, found that average home-loan repayments absorbed 50.9 per cent of median family income, with monthly repayments up 12.4 per cent over the year.