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The RBA's October Financial Stability Review estimates the median mortgage holder could cover more than 12 months of scheduled repayments from offset and redraw balances – a cushion that does much of the work in the Bank's resilience verdict.

When the Reserve Bank of Australia (RBA) says most mortgage holders can handle tougher times, one statistic carries a lot of the weight. In its October 2026 Financial Stability Review (FSR), released on 1 October, the RBA reported offset and redraw balances leaving "the median borrower able to cover over a year of scheduled mortgage payments at current interest rates from these buffers".

The Review also judged that this position is stronger than it was before the pandemic. Coming just two days after the cash rate target was raised by 25 basis points to 4.60 per cent, the finding helps explain why the RBA concluded that "Most Australian households with mortgages remain well placed to manage more difficult conditions".

But a single headline number can hide as much as it reveals. Here is what the measure says, what it does not say, and where the cushion is thinner.

Reading 'over a year' carefully

The phrase has three parts, and each matters.

First, "the median borrower". The median is the borrower in the middle of the distribution: half of borrowers hold larger buffers relative to their repayments, and half hold smaller ones. It is not an average, so it is not pulled up by a handful of borrowers with very large balances. It also says nothing directly about those at the lower end.

Second, "scheduled mortgage payments". The yardstick is the repayment a borrower is required to make, not their total spending. A household could cover its loan for more than a year from these buffers and still face pressure on other bills.

Third, "at current interest rates". The cushion is measured against today's repayments. When rates rise, scheduled repayments rise with them, so the same dollar balance covers fewer months. As Assistant Governor (Economic) Sarah Hunter explained on The Pay Off podcast on 22 September, if the RBA raises rates, a borrower's minimum repayment goes up.

Where the cushion comes from

The buffers counted in the FSR sit in two places: offset accounts and redraw facilities. An offset account is a deposit account linked to a home loan, with its balance set against the loan when interest is calculated. A redraw facility allows a borrower to take back extra repayments made ahead of schedule.

Hunter said most borrowers have offset or redraw accounts and can choose to put more in. She also said just over 40 per cent of households with mortgages are two or more years ahead on their mortgage payments. That is a separate measure from the FSR's median, but it points the same way: a large share of borrowers have been paying down their loans faster than required, building room they can draw on later.

This matters for the wider economy as well as for individual households. Buffers give borrowers time. A household facing a temporary drop in income, or a rise in repayments, can use them to keep paying while it adjusts, rather than falling behind immediately.

Thinner at the edges

The median describes the middle, so the RBA also looks at borrowers who are already stretched.

The FSR found the share of variable-rate owner-occupier borrowers in cash-flow shortfall – where income is not enough to cover scheduled repayments and essential expenses – "increased a little over the first half of 2026, but remains relatively low at around 2 per cent". For this group the RBA uses a different yardstick: it estimates most of them have at least six months of savings. Six months is meaningful breathing space, and it is the more relevant figure for households whose income is already falling short each month.

The RBA's severe stress scenario tests what happens if things go badly wrong. In that scenario, the "unemployment rate increases to 6.3 per cent, inflation increases to 7 per cent, and the cash rate rises to 5.6 per cent", and the share of mortgagors at higher risk of default is estimated to rise to around 5 per cent. Even then, about two-thirds of that group would still have buffers to service their debts for at least six months, according to the Review.

That result shows the cushion working as intended. Buffers do not stop stress from rising, but they slow the path from stress to missed payments.

Pressures on the cushion

Several forces could erode buffers over time. Governor Michele Bullock said on 29 September that scheduled mortgage payments, including interest, are back up to around 10 per cent of household disposable income. She also noted that "it can take 12, perhaps even 18 months" for the full effect of rate changes to flow through, meaning the September increase has yet to show up fully in household budgets.

Living costs are another drain. The August monthly CPI indicator put headline inflation at 4.0 per cent, while Bullock said underlying inflation has been about 3.5 per cent for the past six months. Households that dip into offset balances to meet higher everyday costs reduce the cushion available for their mortgage.

Income is the third factor. Hunter said she saw no signs of systemic financial distress, though individuals can struggle if their income changes. A buffer that looks generous on paper can shrink quickly after a job loss.

The bottom line

The FSR's buffer finding is one of the strongest pillars of the RBA's view that most mortgage holders are resilient. The median borrower could cover more than a year of scheduled repayments from offset and redraw balances, a position the RBA judges stronger than before the pandemic.

The detail matters, though. The measure describes the middle of the distribution, is calculated at current interest rates, and covers only mortgage payments. For borrowers already in shortfall, the relevant estimate is that most have at least six months of savings.

What to watch: the next CPI update on 28 October and the Board's next decision at 2.30 pm AEDT on 3 November. Borrowers may wish to check how many months of repayments their own offset or redraw balance would cover at today's rates.