House prices are falling fast. Are homes any easier to afford?

The typical Australian home was worth $884,855 on 31 October. That is $63,400 less than at the March peak, a fall of 6.7% in seven months.

Capital city values are falling at the fastest pace of any downturn in four decades, Cotality says. In Melbourne's east, agent Jin Ling of Vic Prop told the ABC she sees "incredible buying opportunities out there".

Then, on 3 November, the Reserve Bank lifted the cash rate to 4.85%, its highest level since late 2008. That was the fifth rise this year and the third since prices peaked.

For anyone saving for a first home, the question is simple arithmetic. Does a cheaper house beat a dearer loan?

Barely, and only on the deposit. On our maths, a buyer of the median home today pays about the same each month as at the March peak, because the rate rises cancel the price fall. Confidence: Likely. Three parts to this: the price, the repayment and the loan.

Cotality's October index fell 1.2% in a month. Sydney is 10.1% below its February peak and Perth 8.9% below its April peak. Brisbane fell 2.0% in October alone.

Sellers are under pressure. Homes now take a median 39 days to sell, the longest since August 2020. Vendors are typically cutting their asking price by 4.7%, the deepest discount since May 2019.

That sounds like a buyer's market. But 6.7% off a home that cost about $948,000 in March saves $63,400 once. The interest on a 30-year loan keeps arriving every month, and that is where the saving goes.

Take a buyer with a 20% deposit. At the March peak they would borrow about $758,600. Today the same median home needs a loan of about $707,900.

Cotality's research director, Tim Lawless, puts the average owner-occupier variable rate at around 6.7% after this hike. The RBA has added 0.75 percentage points to the cash rate since the March peak. If lenders passed all of it on, the March buyer paid about 5.95%.

On our maths, that March loan cost about $4,524 a month. Today's smaller loan costs about $4,568.

The new buyer pays roughly $44 a month more for a cheaper house.

Lenders did not pass on every rise in full. The RBA's November Statement on Monetary Policy says variable mortgage rates rose almost 0.75 points between January and September, while the cash rate rose a full point.

Allow for that, and today's buyer comes out about $30 a month ahead. Either way, the gap is small.

Here is the real gain. A 20% deposit on the median home has shrunk from about $189,700 to $177,000, roughly $12,700 less to save. Wages grew 3.2% in the year to June, so each pay packet also covers a little more of the repayment.

The loan itself has moved the other way. Lawless estimates borrowing capacity has fallen around 11.5%, or more than $105,000, because banks test every applicant at a higher rate. Prices are only 6.7% below their peak.

Buyers have noticed. First home buyer mortgage demand fell in September by the most since December 2022, Equifax data shows. The average first home buyer loan still sits near a record $743,000.

Domain's chief economist, Nicola Powell, says a 10% fall is quite possible, and AMP's chief economist, Shane Oliver, now expects a 15% peak-to-trough drop. Powell told the ABC that weaker prices can create opportunities for some buyers.

The logic is strong. A buyer who locks in a lower price keeps that gain for 30 years, while rates can fall. CommBank's Belinda Allen tips two cuts in August and November 2027.

That case is right about the long run. A smaller loan does cost less once rates come down. Renters are also gaining, with the vacancy rate at 2.3%, the highest since January 2022.

But it is a bet on rates, not a fact about today. New Zealand ran this experiment first. In early 2023, with Wellington prices down 18%, CoreLogic NZ found a new mortgage took over 53% of average household income, well above the long-run 38%.

Its chief property economist, Kelvin Davidson, said housing was "still as unaffordable as ever".

The verdict rests on the assumption that a typical buyer pays an average variable rate near 6.7%. Canstar puts the average new owner-occupier rate higher, at 6.75% even before this hike, which would make today's buyer slightly worse off. Nobody knows how far prices fall from here.

Falling prices have not made homes easier to afford yet: three rate rises have cancelled the $63,400 drop in the median home. Confidence: Likely. Buyers with a big deposit and cash buyers gain; first home buyers who need a large loan gain almost nothing until rates fall.

Fifteen sources: Cotality's index, the RBA's statement and Statement on Monetary Policy, ABS wage data, bank and industry research, ABC, SBS and RNZ reporting, and one New Zealand comparison. Repayment figures are our own: a 30-year principal and interest loan with a 20% deposit on Cotality's national median, at 5.95% in March and 6.7% now. We could not verify the exact average rate a March buyer paid. Researched with AI tools; checked and edited by VOID.

House prices are down about 6.7% since March, which sounds like good news for buyers. But interest rates have gone up three times since then, so the monthly repayment on a typical home is about the same as it was. The only real win is a deposit about $12,700 smaller, and banks now lend less than before.