The RBA's latest data show a wide gap between the savings buffers of lower- and higher-income borrowers, a divide that matters more with each increase in the cash rate.

Ask how Australian Mortgage holders are coping with higher interest rates and the answer depends heavily on who is being asked about. Averages and medians tell part of the story. The distribution tells the rest.

The minutes of the Reserve Bank's September Monetary Policy Board meeting contained a telling comparison. Median savings buffers for borrowers in the lowest income quintile amounted to just under one year of scheduled repayments. For those in the highest income quintile, the median buffer was almost two years.

That gap is now being tested once more. On 3 November 2026, the Board raised the cash rate target by 25 basis points to 4.85%, effective from 4 November. The vote was 6–3, with six members supporting the increase and three preferring to hold at 4.60%. It was the fifth rise of 2026 and took cumulative tightening this year to 125 basis points.

Reading the quintile numbers

Income quintiles divide borrowers into five equal groups, from the lowest-earning fifth to the highest. Comparing the bottom and top groups highlights how unevenly resilience is spread.

A buffer measured in months of repayments is a practical gauge. It indicates roughly how long a household could keep meeting its mortgage from savings alone if its income stopped or fell sharply. On the RBA's figures:

  • the median lower-income borrower had savings covering just under 12 months of scheduled repayments;
  • the median higher-income borrower had savings covering almost 24 months.

Both are medians, so half of each group had less. Some lower-income borrowers will have considerably thinner cushions than the median suggests.

Deputy Governor Andrew Hauser provided a broader snapshot on 21 October, telling a Citi conference in Sydney that the median mortgagee holds over a year of buffers.

Why the gap matters when rates rise

A buffer expressed in months is not fixed. When repayments rise, the same pool of savings covers fewer months. A household that has not added to its savings will see its cushion shrink in time terms with every increase that its lender passes on.

To give a sense of how repayments can move, here is a hypothetical illustration using lender rates that are not RBA figures. On a $600,000, 30-year principal-and-interest loan, repayments would be about $3,220.93 a month at a hypothetical 5.00% and about $3,694.30 at a hypothetical 6.25%. That 1.25-point difference adds about $473.37 a month. It assumes full pass-through by the lender, which is not guaranteed.

For a borrower starting with just under a year of savings, increases of that size erode the Margin more quickly in proportional terms than for one with nearly two years.

None of this means lower-income borrowers are in widespread distress. The September minutes recorded that fewer than 2% of owner-occupier borrowers had a Cash Flow shortfall. Scheduled mortgage payments were about 10% of household disposable income, around their 2024 peak. Very few borrowers were estimated to be in negative equity, even with a 20% fall in housing prices.

The October Financial Stability Review concluded that "Most Australian households with mortgages remain well placed to manage more difficult conditions."

Renters were not part of the quintile comparison in the minutes, but Hauser noted that about 15% of renters were in negative cash flow, compared with about 2% of mortgages. That is a reminder that the households with the least financial room are not always borrowers.

The jobs risk

Savings buffers are most likely to be called upon if someone loses their Job or has their hours cut. That is why the RBA's labour market outlook is central to the question.

The November Statement on Monetary Policy forecasts the Unemployment rate rising from 4.4% in June 2026 to 4.7% by December 2026, 4.9% by December 2027 and 5.1% by December 2028. The December 2026, 2027 and 2028 figures are each higher than in the August forecasts. The Board's statement noted that "the unemployment rate is projected to rise by more than expected in the August forecasts", while also saying employment is expected to keep growing.

Hauser has acknowledged the human cost: "No lost job is one to celebrate."

Why the RBA kept tightening

The Board's rationale rests on inflation, which remains above the 2–3% target. Monthly headline CPI was 4.3% over the year to September 2026. Trimmed-mean inflation, the RBA's preferred underlying measure, was 3.7% over the year to the September quarter. The Board said: "Inflation remains elevated and recent data indicate that it is broadly based."

Rising prices also stretch household budgets regardless of how rates move. Assistant Governor Sarah Hunter, in an interview aired on 25 October, said: "We don't want to live with high Inflation for a long time." She added: "We're not trying to achieve a sharp stop or a really big downturn or anything like that."

Governor Michele Bullock, in an address at the University of New England on 23 October, put it simply: "ultimately, the work of the RBA is about people."

The bottom line

On the RBA's September figures, the median lower-income borrower had savings covering just under a year of repayments, while the median higher-income borrower had almost two years. That difference shapes how much room each group has as rates rise, and the gap could matter more if unemployment climbs as the November forecasts project. Overall shortfalls remained under 2% before today's increase, but the latest rise to 4.85% will draw further on cushions where lenders pass it on. Households wanting to understand their own position can consider speaking with a licensed adviser or their lender.