Key Highlights

  • Hunter said individual households are hurting but the RBA is not seeing systemic mortgage stress.
  • About 2 per cent of variable-rate owner-occupiers have a cash-flow shortfall, and less than 1 per cent of borrowers are in negative equity.
  • In the severe scenario, the share of mortgagors with a cash-flow shortfall rises to about 5 per cent, and banks are judged able to keep lending.

Sarah Hunter's distinction between households under pressure and a financial system under threat is central to how the Reserve Bank judges the cost of higher rates, and the Bank's latest stability data show where that line sits.

There is a difference between a household struggling with its mortgage and a banking system struggling with its mortgage book. The first is a personal hardship; the second is a risk to the whole economy. When Sarah Hunter, Assistant Governor (Economic) at the Reserve Bank of Australia (RBA), told 60 Minutes that the Bank is not seeing systemic mortgage stress, she was drawing exactly that distinction.

The interview, recorded on 21 October and broadcast on 25 October 2026, came after four rate rises this year that have taken the cash rate target to 4.60 per cent. This article examines what "systemic" means in this context, the evidence the RBA relies on, and the ways in which individual stress is still acknowledged.

What Hunter said, and where the line sits

Hunter's comments on mortgages combined reassurance with care. She said most borrowers entered this period of higher rates with buffers, such as savings in offset accounts, and that the RBA is not seeing systemic mortgage stress.

She pointed to one indicator in particular: "We're not seeing signs of lots of people having to sell their home because that's putting them into financial stress." And she framed the Bank's intent clearly: "We're not trying to put people out of their homes."

The word "lots" matters. Hunter did not claim no one is under pressure. Her claim was about scale: that distress is not widespread enough to become a broad problem.

Governor Michele Bullock made the same distinction from the other side at her 29 September media conference. "But at an individual level, yes, there are households that are hurting," she said, having earlier acknowledged: "Those who have mortgages, yes, this clearly impacts them and it hurts them."

Systemic strain, by contrast, would involve stress large enough to threaten lenders, credit supply or the stability of the financial system. That is the territory of the RBA's Financial Stability Review (FSR), the October 2026 edition of which was released on 1 October with data to 25 September.

Its headline assessment was: "Our latest assessment is that the Australian financial system remains resilient, but there's no room for complacency." On households specifically: "Most Australian households with mortgages remain well placed to manage more difficult conditions".

The evidence on the household side

The FSR sets out several measures that help locate where stress sits today:

  • Cash-flow shortfalls: around 2 per cent of variable-rate owner-occupiers, projected to stay a little under 2 per cent, and well below the 2024 peak.
  • Buffers: the median borrower can cover over a year of scheduled payments.
  • Negative equity: less than 1 per cent of borrowers are estimated to owe more than their home is worth.
  • Arrears and hardship: loans 90 or more days in arrears increased a little over the year to date, to around pre-pandemic levels; the share in formal hardship increased but remains low.
  • Lending standards: high debt-to-income lending is well below APRA's limit of 20 per cent.

Governor Bullock repeated the overall conclusion in her 28 October opening statement to the Senate Economics Legislation Committee, saying household financial stability risks are contained and only a small share of borrowers are in negative equity or severe repayment difficulty.

Rising arrears and hardship, even from low levels, are the kind of detail that shows individual stress is real. The FSR's point is that, at present, it is not large enough to threaten the system.

Testing the line under a severe scenario

The FSR goes further, asking what would happen if conditions deteriorated sharply. Its severe scenario assumes unemployment of 6.3 per cent, a 20 per cent fall in house prices, a cash rate of 5.6 per cent, inflation of 7 per cent and a 1.4 per cent fall in GDP. This is a stress test, not a forecast.

Under that scenario, the share of mortgagors with a cash-flow shortfall rises to about 5 per cent, and around 5 per cent of mortgages would be in negative equity under a 20 per cent price fall. But the share of borrowers facing the most dangerous combination, a cash-flow shortfall plus low savings plus negative equity, stays under 1 per cent.

On the lenders' side, the FSR concluded: "Australian banks are well positioned to continue lending, even in a downturn". Risks from non-bank lenders were described as "contained by their relatively small size". Business insolvencies are around their longer-run average, though elevated in hospitality, construction and transport.

The FSR also noted that "The principal risks are increasingly coming from abroad."

Why the distinction shapes policy

The line between personal and systemic stress matters for monetary policy. If higher rates were creating systemic strain, the costs of further tightening would extend well beyond individual households to the broader economy. The RBA's current assessment that strain is contained is one of the inputs that allows it to focus on inflation, which remains above target: the Australian Bureau of Statistics reported headline CPI of 4.3 per cent and trimmed mean (underlying) inflation of 3.6 per cent for September.

Hunter also cautioned that the RBA is not seeking a hard landing: "We're not trying to achieve a sharp stop or a really big downturn or anything like that." On recession, she said: "We don't see any signs of that yet in any of the data that we track."

The Governor has noted that the full effects of recent rate rises are yet to be felt, so the household measures above may continue to shift. Hunter declined to signal the outcome of the Board's 3 November meeting; the Board has said it is prepared to act "including increasing the cash rate target further if needed".

The bottom line

Hunter's line on 60 Minutes was carefully drawn: individual households are hurting, but the RBA does not see systemic mortgage stress. The FSR supports that distinction, with small shares of borrowers in shortfall or negative equity, sizeable median buffers, and banks judged able to keep lending even in a severe downturn. Rising arrears and hardship, though still low, are a reminder that the aggregate picture does not capture every household.

For borrowers, it is worth knowing that the RBA's reassurance is about the system, not any individual loan. The Board's next decision is due at 2.30 pm (AEDT) on 3 November, and its outcome is not yet known.