House Prices Are Falling: What It Does to Your Refinance, Your LVR and Your Equity (September 2026)
Australian home values fell 3.1 per cent in the three months to August 2026, the combined capitals fell 3.7 per cent, and Sydney is now 7.1 per cent below its February peak with Melbourne 6.8 per cent below its 2022 high, according to Cotality’s September 2026 chart pack. For a borrower, a lower value means a higher loan-to-value ratio on the same loan, and LVR is what lenders price on: the rate tiers step at 60, 70 and 80 per cent, and above 80 per cent most lenders require lenders mortgage insurance. Every borrower who refinances in the next year will be valued at today’s number, not last year’s, so the refinance decision now has a clock on it. This guide sets out the data, the mechanics and the moves, using only published figures.
How far have house prices fallen? The September 2026 numbers
Cotality’s Home Value Index fell 3.1 per cent nationally over the three months to August 2026. The combined capitals fell 3.7 per cent and the regional markets 1.2 per cent. Sydney led the decline at 4.7 per cent for the quarter, then Melbourne at 3.9, Perth 3.2, Canberra 2.8, Brisbane 2.7 and Adelaide 1.6. Over the year Sydney is down 4.6 per cent and Melbourne 4.7, while Perth, Brisbane and Adelaide are still up 15.6, 10.8 and 8.6 per cent because their falls started later. Darwin is the only capital still at a record high.
| City | Quarter to August 2026 | Year to August 2026 | Below record high | Peak month |
|---|---|---|---|---|
| Sydney | -4.7% | -4.6% | -7.1% | February 2026 |
| Melbourne | -3.9% | -4.7% | -6.8% | March 2022 |
| Brisbane | -2.7% | +10.8% | -2.7% | May 2026 |
| Adelaide | -1.6% | +8.6% | -1.6% | May 2026 |
| Perth | -3.2% | +15.6% | -3.2% | April 2026 |
| Hobart | -0.2% | +8.1% | -1.1% | March 2022 |
| Darwin | +0.9% | +14.6% | at record high | current |
| Canberra | -2.8% | -0.4% | -5.2% | May 2022 |
| Combined capitals | -3.7% | +1.1% | ||
| Australia | -3.1% | +2.7% |
Two details in the pack matter more than the headline. The fall is being led by the expensive end: upper-quartile houses in Sydney and Melbourne are already more than 10 per cent below their peaks, while the cheapest quarter of each market has fallen far less. And the decline widened in August rather than narrowing, with every capital except Darwin lower on Cotality’s rolling 28-day measure to 6 September. That is the pattern of a market still finding its floor, not one that has found it.
The selling data says the same thing. Homes now take a median 39 days to sell nationally against 28 a year ago (Melbourne 43, Sydney 45), the median vendor discount across the capitals has reached 4.2 per cent, the largest in at least two years, total listings are 18 per cent higher than a year ago, and the four-week auction clearance rate has sat below 50 per cent since June. Buyers have choice and vendors are conceding on price, which is exactly the environment in which bank valuations come in conservative.
Why a lower valuation changes your refinance
Your loan-to-value ratio is the loan divided by the lender’s valuation, and it moves every time the valuation does. A loan that was 80 per cent of value a year ago is 86 per cent of a value that has fallen 7 per cent, even though the balance has barely changed. Lenders price on that ratio: HSBC’s published home loan card, for example, steps its rate up at 60, 70 and 80 per cent LVR, Suncorp Bank’s advertised discount applies only at 60 per cent or less, and above 80 per cent most lenders require lenders mortgage insurance, a one-off premium that on a refinance is charged again with the new lender. A lower valuation can therefore turn a refinance that saved money into one that costs it.
Three things follow. First, the borrowers with the most to gain from refinancing, those who bought or last refinanced at 80 per cent in 2024 or 2025, are the ones whose LVR has drifted furthest. Second, the sharpest advertised rates in the market are reserved for the 60 per cent tier, which a falling valuation pushes further away. Third, equity release shrinks: a lender will usually let you borrow up to 80 per cent of the current value without insurance, so a 7 per cent fall on a $1 million home removes $56,000 of accessible equity at that line.
None of that makes refinancing a bad idea. It changes the sequence. The valuation has to be understood before the rate is compared, because the tier the valuation lands you in decides which rates you are actually eligible for.
The valuation problem: three numbers that no longer agree
In a falling market three valuations of the same house drift apart: what you think it is worth, which usually anchors on last year’s sales; what an index like Cotality’s says the market has done; and what a bank valuer will write down this month, which weighs the latest comparable sales, the 4.2 per cent vendor discounts and the 39-day selling times. Bank valuations lag on the way up and lead on the way down, because valuers are paid to be conservative when comparable sales are falling. The number that decides your refinance is the third one.
Valuations also differ between lenders. Each lender orders its own valuation, many use automated or desktop valuations for lower-LVR loans and a full inspection for higher ones, and two valuers can land tens of thousands of dollars apart on the same street in the same week. That gap is one of the few things a borrower can use in a falling market: a broker can obtain an upfront valuation with more than one lender before an application is lodged, and place the loan where the number, and therefore the tier, is best. Ordering a valuation is not a credit application and does not touch your credit file.
If a valuation lands lower than expected, it can be challenged with recent comparable sales, but valuers rarely move far. The practical response is to pick the lender, not to argue with the valuer.
Worried a lower valuation could hold up your refinance? WhatsApp, text or call Ahmed and talk through your loan and your LVR. His own mobile, no call centre, and nothing touches your credit file until you choose a lender.
A worked example: same loan, 7 per cent less house
Take a home valued at $1,000,000 in early 2025 with an $800,000 loan, an 80 per cent LVR. Apply a 7 per cent fall, roughly Sydney’s distance from its peak, and the value is $930,000. The loan is now 86 per cent of value. On a refinance that means lenders mortgage insurance with the new lender, a higher rate tier than the one the borrower was quoted last year, and no equity release at all. To get back under 80 per cent the borrower would need to reduce the loan to $744,000, a $56,000 payment, or wait for values to recover.
| Early 2025 | September 2026 after a 7% fall | |
|---|---|---|
| Valuation | $1,000,000 | $930,000 |
| Loan balance | $800,000 | $800,000 (interest-only, or slightly lower on principal and interest) |
| LVR | 80% | 86% |
| Lenders mortgage insurance on refinance | Usually not required | Usually required |
| Loan needed to reach 80% LVR | $800,000 | $744,000 |
| Equity accessible at 80% LVR | $0 | None; $56,000 short |
Now run the same numbers for a borrower who was at 70 per cent: a $700,000 loan on the same home becomes 75 per cent after the fall. That borrower has lost a tier, from the 70 per cent band to the 80 per cent band on cards that price by 10-point steps, but is still insurable-free and still refinanceable. And a borrower at 60 per cent becomes 65 per cent, which on most cards changes nothing. The damage from a falling market is concentrated in the highest-LVR loans, which are also the loans the RBA’s own figures show growing: high-LVR lending is running at 10.6 per cent of new owner-occupier loans and interest-only lending at 21.7 per cent.
What you can do if your LVR has drifted up
Five moves exist, in rough order of cost. Ask your current lender to reprice the loan, which usually needs no new valuation because the lender already holds the security. Get upfront valuations with two or three other lenders through a broker and refinance where the number is best. Pay the loan down to the next tier if the cash is there, because the rate saving can be worth more than the return on that cash elsewhere. Split the refinance so that only the portion under 80 per cent moves and the remainder stays put. Or hold, keep paying principal, and refinance when the balance and the market have moved the ratio back.
Repricing first is the rule. The same lender that would charge insurance to a new borrower at 86 per cent will often reprice an existing loan without a valuation, because the risk on its book has not changed by its own measure. It will not offer its best rate unprompted, and it will usually match a written competitor quote faster than it will volunteer a discount. The refinance guide covers the reasons people refinance and the costs in full.
Fixed-rate borrowers have a further variable. The RBA’s average new fixed rates were 6.19 per cent for terms up to three years and 6.75 per cent for longer terms in June 2026, against 6.25 per cent variable, so breaking a fixed rate to refinance may carry break costs on top of the LVR problem. Our break costs guide explains how they are calculated and when they are worth paying.
Your LVR today, not the one on last year’s approval.
A former banker orders upfront valuations with the lenders that suit your loan, tells you which tier you land in with each, and gives you the written comparison that makes your current lender reprice. No credit enquiry until you decide to apply.
Book a free LVR and refinance review with a former bankerInvestors: yields up, values down, rates higher
The same pack that records falling values records rising rents and yields: rents rose 5.7 per cent over the year, gross yields reached 3.8 per cent nationally, the highest since September 2019, and 3.6 per cent across the capitals. Melbourne’s gross yield is 4.0 per cent, Perth’s 3.9, Darwin’s 6.3. For an investor refinancing, the cashflow case has improved while the LVR case has worsened, and investor rates sit higher: the RBA’s average new investor variable rate was 6.41 per cent in June 2026 against 6.25 per cent for owner-occupiers, with long fixed rates at 7.08 per cent.
Investor lending fell 10.2 per cent in the June quarter and the investor share of new lending dropped to 38 per cent from above 40 per cent, which tells you where the competition for investor refinances is heading: lenders that want to keep their investor books will price to keep them. An investor with a portfolio across several properties should also check cross-collateralisation, because a valuation fall on one security can drag the LVR of the whole structure, and untangling that is easier before the next valuation than after it. Our investment property refinance guide covers the structure question, and the rental yields guide covers the cashflow side city by city.
Who a falling market favours
Three groups gain from the September 2026 numbers. Upgraders with low-LVR loans on their current home, who sell into a soft market but buy into a softer one with a 4.2 per cent median vendor discount and 18 per cent more stock to choose from. First home buyers, who wrote 30.4 per cent of owner-occupier lending in the June quarter and whom the pack shows using the government’s 5 per cent deposit guarantee. And Australians overseas, who buy on shaded income and needed exactly the extra negotiating room that longer selling times and higher listings provide.
The catch for all three is the same valuation lag in reverse: a buyer who negotiates a genuine discount still needs the lender’s valuer to support the price, and in a falling market valuers are less likely to support a price above recent comparable sales than below it. Pre-approval with a lender whose valuation policy suits the property type matters more than usual. The buyer’s market guide sets out the five signals in detail, and Australians abroad should read buying property in Australia from overseas for the income and FIRB side.
The order of operations for the next 90 days
Find your current rate and balance. Estimate your value from recent sales, not from last year’s number. Work out the LVR and which tier it sits in. Ask your lender to reprice. If the reprice does not close the gap, get upfront valuations with two or three lenders through a broker and compare the whole product, rate, fees and insurance included, at the tier each valuation puts you in. If the numbers work, move before the next monthly index print, because the September pack shows the decline widening, not narrowing.
- Rate, balance, fixed expiry date and offset balance, from the statement.
- A realistic value: the last three comparable sales in your street or building, not the agent’s appraisal.
- LVR to the nearest point, and the tier boundary it sits closest to.
- A repricing request to the current lender, in writing, with a competitor quote attached.
- Upfront valuations through a broker with the two or three lenders whose products fit, before any application.
- The decision on the whole product, at the tier the best valuation delivers, with insurance and break costs counted.
Where Everstone fits
Everstone Finance is a Melbourne mortgage broker run by former bankers, refinancing owner-occupied and investment loans Australia wide across a 40+ lender panel, by video. In a falling market the work is valuation first: we order upfront valuations with the lenders that suit the loan, tell you which LVR tier each puts you in, and produce the written comparison that makes your current lender reprice or shows why moving wins. The lender pays us on settlement; the comparison costs you nothing.
Where the numbers say stay, we say stay. Where they say move, we run the application, manage the valuation and settle the switch. Either way you make the decision on today’s valuation, with the tier and the insurance question answered before you commit.
Prices fell. Your loan did not. Find out what that did to your rate.
Tell a former banker your balance, your rate and your suburb. You get the realistic value, the LVR tier, the reprice letter and the market comparison, and the honest answer if the right move is to hold.
Book a chat with a former bankerFrequently asked questions
How much have house prices fallen in Australia in 2026?
According to the Cotality Monthly Housing Chart Pack for September 2026, national dwelling values fell 3.1 per cent over the three months to August 2026 and the combined capitals fell 3.7 per cent. Sydney is 7.1 per cent below its February 2026 peak and Melbourne 6.8 per cent below its March 2022 peak. Brisbane, Adelaide and Perth are 1.6 to 3.2 per cent below peaks reached in April and May 2026, and Darwin is at a record high.
What happens to my LVR when my home loses value?
Your loan-to-value ratio rises. LVR is the loan balance divided by the lender valuation, so an $800,000 loan on a home valued at $1,000,000 is 80 per cent, and the same loan on a valuation that has fallen 7 per cent to $930,000 is 86 per cent. Lenders set rate tiers and lenders mortgage insurance by LVR, so a lower valuation can move you into a higher rate tier and above the 80 per cent line at which insurance is usually required.
Do I have to pay lenders mortgage insurance again if I refinance?
If the new lender values the home so that the loan exceeds 80 per cent of value, usually yes. Moneysmart describes LMI as a one-off cost payable when the amount borrowed exceeds 80 per cent of the value of the property, and it protects the lender, not you. A premium paid to a previous lender is not transferred, so a refinance above 80 per cent generally means paying it again. Below 80 per cent it is usually not required.
Can I refinance if my LVR is above 80 per cent?
Often yes, but the whole product has to be compared. Options include asking the current lender to reprice without a new valuation, obtaining upfront valuations with other lenders because valuers differ, paying the loan down to 80 per cent, splitting the loan so only the portion under 80 per cent moves, or holding until repayments and the market bring the ratio back. A broker can order valuations with several lenders before any application is lodged.
Will my current lender revalue my home if I ask for a better rate?
Usually not. A repricing request on an existing loan is normally assessed on the loan the lender already holds, without a new valuation, which is why asking your current lender to reprice is the first step in a falling market. Lenders rarely offer their best rate unprompted and usually respond faster to a written competitor quote than to a general request.
Is now a good time to refinance in Australia?
It depends on the gap between your rate and the market at the LVR tier a current valuation puts you in. The RBA cash rate is 4.35 per cent, held in July and August 2026 after three increases between February and May, and the RBA average new owner-occupier variable rate was 6.25 per cent in June 2026. If your rate is well above that and your LVR is still at or under 80 per cent, refinancing is worth pricing now, before the next monthly value print moves the ratio again.