Four rate rises in 2026 have pushed mortgage repayments higher, yet the RBA's October Financial Stability Review finds the share of seriously overdue home loans has only edged up and remains around pre-pandemic levels.

Mortgage arrears are one of the bluntest measures of household strain. A loan 90 days or more behind signals a borrower who has fallen well behind, not one juggling a tight month.

According to the Reserve Bank's October 2026 Financial Stability Review (FSR), released on 1 October, arrears on loans 90 or more days past due have risen slightly but the share "remains around pre-pandemic levels". That finding comes after a year in which the Monetary Policy Board lifted the cash rate four times, by a combined percentage point.

A year of rising repayments

The tightening began on 3 February, when the cash rate target rose from 3.60 per cent to 3.85 per cent. Further quarter-point increases followed on 17 March (to 4.10 per cent) and 5 May (to 4.35 per cent). The Board held at its August meeting, then raised the rate again on 29 September, taking the target to 4.60 per cent, effective 30 September.

Those moves have reached household budgets. Speaking on 13 August, when the cash rate was still 4.35 per cent, Assistant Governor (Financial Markets) Christopher Kent said: "Scheduled mortgage payments have risen and are now close to their 2024 peak as a share of household disposable income."

The FSR makes a similar point in its own words: "Scheduled mortgage payments have been the largest claim on household income". Governor Michele Bullock, at her 29 September media conference, put mortgage payments "back up sort of around 10 per cent of" disposable income, an approximation she offered while noting the comparison was with "when we had interest rates at 4.35 per cent, so they'll go up a bit further."

It is worth keeping the timing in mind. The September increase took effect on 30 September, the day before the FSR was published. Arrears, by definition, take months to show up, so any pressure from the latest rise could not yet be reflected in a 90-day measure.

Why arrears have stayed contained

The FSR points to several features of the household sector that help explain why rising repayments have not translated into a surge in serious delinquencies.

  • Cash-flow shortfalls are rare. The share of variable-rate owner-occupier borrowers with a cash-flow shortfall "remains relatively low at around 2 per cent", and is projected to stay "a little under 2 per cent for some time".
  • Buffers are substantial. The review finds "the median borrower [is] able to cover over a year of scheduled mortgage payments" from money held in offset and redraw accounts.
  • Negative equity is limited. Fewer than 1 per cent of borrowers owe more than their homes are worth. Even under a further 20 per cent fall in prices, "only around 5 per cent of mortgages would fall into negative equity".

The labour market is another part of the story. Bullock told the House of Representatives Standing Committee on Economics on 18 September: "The unemployment rate – at 4.5 per cent – is low by historical standards." She added that "the share of the population with a job is close to a record high."

By 29 September the unemployment rate had reached 4.6 per cent. Bullock was careful about how that rise should be read: "the unemployment rate has risen from 3.5 per cent over the past couple of years to 4.6 per cent", she said, noting that "there's been over a million jobs created" and that the increase "doesn't mean job losses."

Offset accounts feature in the Governor's thinking too. "A lot of people have a mortgage, and then they have an offset account, which sits in the background," she said on 29 September, adding that "the amount of money in those offset accounts has actually grown quite a lot over the last decade or so."

Where the pressure is showing

None of this means stress is absent. The October FSR media release said most mortgage households are well placed to cope even with a sharp fall in house prices, but that there are some pockets of stress. A small share of households experiencing difficulty can still represent a significant number of families.

Housing markets have also turned. The Board's 29 September statement noted that housing prices have fallen in most capital cities and that new housing loans have declined noticeably. Bullock told parliament that "housing prices are still around 50 per cent higher than they were in early 2020", which helps explain why so few borrowers are underwater even after recent declines.

The RBA also models what could happen in a much harsher environment. In a very adverse scenario, the FSR estimates the share of mortgagors at higher risk of default rises to about 5 per cent. That is a stress test, not a forecast, but it shows the review does not assume today's calm will last indefinitely.

Policy lags and what comes next

Arrears are a lagging indicator, and so is monetary policy. Bullock said on 29 September: "We raised interest rates three times earlier in the year." She added: "A lot of that effect is still to flow through." On how long that takes, she said "it can take 12, perhaps even 18 months".

That means the arrears data published so far reflect only part of the tightening delivered in 2026. The cumulative effect of four rises will continue to work through household budgets well into 2027.

The Board is also clear about its priority. In its 29 September statement, it said it is focused on preventing high inflation from becoming embedded and judged that "a further tightening of financial conditions" is warranted. Bullock acknowledged the strain directly: "I know they don't understand why we have to do this and it hurts them."

She also declined to signal what comes next: "I'm not going to give you forward guidance." The Board's next decision is due at 2.30 pm on 3 November, and the minutes of the September meeting are due on 13 October.

The bottom line

The October FSR shows that, so far, Australian mortgage holders have absorbed four rate rises without a material jump in serious arrears. The 90-plus day measure has edged up but remains around pre-pandemic levels, supported by large savings buffers, low negative equity and a labour market that is easing rather than collapsing.

The caveats are real. Repayments are close to their 2024 peak as a share of income and set to "go up a bit further", the September hike had not yet registered in the data, and the RBA itself says much of this year's tightening is still to flow through. Pockets of stress exist, and the review's adverse scenario shows how quickly the picture could shift if unemployment rose sharply. For now, the arrears data describe a household sector under pressure, but not one in widespread distress.