Key Highlights

  • Bullock said of the September rise that “this clearly impacts them and it hurts them”, referring to people with mortgages.
  • The minutes say scheduled mortgage payments were about 10% of household disposable income, near their 2024 peak.
  • Arrears were low, fewer than 2% of owner-occupier borrowers had a cash flow shortfall, and very few borrowers were in negative equity.

Michele Bullock did not soften the impact of September's rate rise on borrowers, acknowledging directly that the decision hurts people with mortgages, while the RBA's own data suggests most are still keeping up with repayments.

Speaking after the Reserve Bank of Australia (RBA) lifted the cash rate target by 25 basis points to 4.60% on 29 September 2026, Governor Michele Bullock addressed mortgage holders head-on.

"Those who have mortgages, yes, this clearly impacts them and it hurts them," she said.

Earlier in her opening remarks, she had made a similar acknowledgement: "Now, I know this decision is difficult for households with a mortgage and businesses with loans".

The rise, effective 30 September, took the cash rate from 4.35% and was the fourth increase of 2026, following three earlier in the year between February and May. For households with variable-rate loans, each of those moves has the potential to flow through to higher repayments, depending on how their lender passes on the change.

The impact on mortgage borrowers

Central banks often describe the effects of their decisions in abstract terms, referring to financial conditions or aggregate demand. Bullock's language was more personal, and it was paired with an explanation of why she believed the pain was necessary.

"Today's increase in interest rates is needed to slow the economy and return inflation to target," she said.

She tied the decision to a cost of living experience that all households share, whether or not they have a home loan: "Every household has seen how the price of everything has gone up in recent years."

The latest inflation readings provide context. Headline CPI was 4.0% over the year to August 2026, according to the monthly CPI. Underlying inflation, measured by the trimmed mean, was 3.6% over the year to the June quarter of 2026, well above the RBA's 2–3% target range. Bullock said underlying inflation had been running at "about 3.5 per cent for the past six months", or "a percentage point above our target".

Her argument, in short, was that persistent inflation also hurts households, and that higher borrowing costs were part of the Board’s effort to bring inflation back to target.

What the RBA's data shows about borrowers

The minutes of the 28–29 September meeting, published on 13 October, contain a detailed snapshot of household finances. They indicate higher repayment pressure, while measures of arrears remain low.

  • Repayment burden: scheduled mortgage payments were about 10% of household disposable income, near their 2024 peak. Bullock said this share was similar to when the cash rate was 4.35%.
  • Arrears: arrears were low, and loan impairments were around historical lows.
  • Cash flow shortfalls: fewer than 2% of owner-occupier borrowers had a cash flow shortfall, well below the 2023–24 peak.
  • Savings buffers: median buffers were just under one year of repayments for borrowers in the lowest income quintile and almost two years for those in the highest.
  • Negative equity: very few borrowers were in negative equity, and that was likely to remain the case even if housing prices fell 20%.

The Financial Stability Review released on 1 October reached a similar conclusion. In paraphrase, it found that most mortgage holders should cope with harder conditions even if house prices fell sharply, though there are some pockets of stress.

The difference between the lowest and highest income groups is worth noting. A buffer of just under a year of repayments provides a cushion, but a thinner one than that held by higher-income households.

Bullock also pointed to a feature of the Australian mortgage market that can soften the immediate blow for some households: "a lot of people have a mortgage, and then they have an offset account, which sits in the background."

In general terms, money held in an offset account is set against the loan balance when interest is calculated, while remaining available to the borrower. The Governor's remark was a reminder that the headline repayment figures do not capture the full position of every household, since some borrowers have savings working quietly alongside their loans.

Why housing weakness did not stop the Board

The September decision came as the housing market was already softening. The Board's statement said "housing prices have fallen in most capital cities" and "new housing loans have declined noticeably". The minutes noted that established housing prices had fallen faster than expected and that "the cumulative fall in housing prices is likely to be greater than had been assumed."

That raises an obvious question for mortgage holders: why tighten further while home values are slipping? The minutes suggest the Board's focus remained on inflation. Members judged that developments "pointed to an increase in the risk of persistently elevated inflation", while arguments for holding, centred on downside risks to activity, were judged modest.

Bullock also stressed that falling prices did not change the longer-term picture for housing: "we have a structural under supply of housing."

On the question of whether the economy could tip into recession, she said: "That is not our central base case at this moment."

What comes next for borrowers

The Governor declined to say whether further rises were coming. "I'm not going to give you forward guidance," she said, adding: "The Board will increase interest rates again if that's what's needed to get inflation down."

The next cash rate decision is scheduled for 2.30 pm on 3 November 2026. Before then, the next CPI release, covering September data, is scheduled for 28 October.

The effects of this year's rises are still working through. Bullock said the full effect of interest rate changes takes 12 to 18 months. Borrowers may wish to check their loan terms with their lender to understand how any change in the cash rate flows through to their own repayments.

The bottom line

Bullock's "it hurts them" was an acknowledgement that the burden of the RBA's inflation fight falls heavily on people with mortgages. The RBA's own figures show that burden is real, with repayments taking about a tenth of household disposable income, close to their 2024 peak. Yet the same figures show arrears remain low, most borrowers hold buffers and very few are in negative equity. The Board's judgement is that the risk of entrenched inflation outweighs the strain, and the next test of that judgement is scheduled for 3 November.