Mortgage repayments were already absorbing about a tenth of household Disposable Income when the Board met in September, which puts today's move to 4.85% in sharper perspective.

About 10 cents in every dollar of household disposable income. That was the share going to scheduled Mortgage payments when the Reserve Bank's Monetary Policy Board met in late September, according to the minutes of that meeting. The minutes described the ratio as being around its 2024 peak.

At that 29 September meeting, the Board raised the cash rate from 4.35% to 4.60%. On 3 November 2026 it went again, lifting the rate to 4.85%, effective 4 November. The latest increase was decided by a 6–3 vote, with six members favouring a rise and three preferring to hold at 4.60%.

The 10% figure is a national aggregate. But it is one of the clearest indicators the RBA tracks of how heavily Debt servicing weighs on household budgets, and it helps explain why the Central Bank has been at pains to examine borrower resilience before each move.

What the ratio measures

Scheduled mortgage payments include the interest and principal that borrowers are contractually required to pay. Measured against disposable income (what households have after tax), the ratio captures how much of the typical income stream is committed to housing debt before anything else is bought.

When the ratio rises, households have less left over for other spending. That is part of how monetary policy works. Deputy Governor Andrew Hauser, speaking at a Citi conference in Sydney on 21 October, said: "We do need to keep working on the very basic point that higher interest rates actually bring Inflation down."

The Board's 3 November statement links higher rates directly to slower activity: "Higher interest rates and falls in housing prices and turnover are expected to weigh on growth." Governor Michele Bullock, in her 28 October Senate opening statement, noted that "Household spending growth has been moderating only gradually."

Why rates went up anyway

If repayments were already near a peak share of income, why push them higher? The Board's answer is that inflation remains the larger problem.

  • Monthly headline CPI rose 4.3% over the year to September 2026.
  • Trimmed-mean inflation, the RBA's preferred underlying gauge, was 3.7% over the year to the September quarter.
  • The target is 2–3%, with the RBA aiming for the midpoint.

These two inflation measures tell slightly different stories, and the RBA watches both. The headline figure has been pushed up by fuel and Commodity prices linked to the Middle East conflict. The underlying figure, which strips out the largest price movements in either direction, shows that pressure extends well beyond petrol. As the statement put it: "Inflation remains elevated and recent data indicate that it is broadly based."

The Board added that it "is conscious of the period in which inflation has been too high" and warned of "an increasing risk that higher inflation expectations will become embedded."

A hypothetical sense of the extra cost

The RBA does not publish household-level repayment estimates, and lenders set their own rates. The following is purely an illustration, using hypothetical lender rates that are not RBA figures.

Take a $600,000 principal-and-interest mortgage over 30 years (360 monthly payments):

  • At a hypothetical 5.00%, monthly repayments would be about $3,220.93.
  • At a hypothetical 5.75%, about $3,501.44.
  • At a hypothetical 6.00%, about $3,597.30.
  • At a hypothetical 6.25%, about $3,694.30.

In this example, a 1.25-point increase from 5.00% to 6.25%, matching the size of the RBA's cumulative 125-basis-point rise in 2026, adds about $473.37 a month. The final quarter-point step alone, from 6.00% to 6.25%, adds about $97.00 a month. Both figures assume the lender passes on each change in full, which is not guaranteed.

For a household whose income has not kept pace, increases of that kind would push its own repayment-to-income ratio higher. The aggregate ratio the RBA monitors would move in the same direction if borrowing costs rise faster than incomes.

Strain versus distress

A high repayment ratio does not automatically mean borrowers are falling behind. The September minutes drew a distinction between the burden of repayments and the ability to meet them.

Those minutes reported that fewer than 2% of owner-occupier borrowers had a Cash Flow shortfall. Median savings buffers ranged from just under one year of scheduled repayments for the lowest income quintile to almost two years for the highest. Very few borrowers were estimated to be in negative equity, even if housing prices fell 20%.

The October Financial Stability Review reached a similar conclusion: "Most Australian households with mortgages remain well placed to manage more difficult conditions."

Still, conditions are shifting. The Board's statement noted that "The economy is slowing, housing prices have fallen significantly and the Unemployment rate has risen." The November Statement on Monetary Policy forecasts unemployment rising to 4.7% by December 2026 and 5.1% by December 2028, up from 4.4% in June 2026. These are forecasts and subject to considerable uncertainty, but a softer jobs market can turn a heavy repayment burden into a harder one for households whose incomes are affected.

The RBA's forecasts assume a cash rate averaging 4.9% in 2026/27, based on market pricing as at 28 October. The next decision is scheduled for 2.30 pm on 8 December 2026, and the next monthly CPI release is due on 25 November.

Hauser has been frank about the trade-off: "We need a period of below-trend growth to bring inflation down, and we're seeing that happening." Assistant Governor Sarah Hunter, in an interview aired on 25 October, said: "We're not trying to achieve a sharp stop or a really big downturn or anything like that."

The bottom line

At the time of the September meeting, scheduled mortgage payments were already around 10% of household disposable income, near their 2024 peak. Today's increase to 4.85% will add to that burden for borrowers whose lenders pass it on, as the hypothetical $600,000 illustration shows. RBA data from September suggested most borrowers had buffers and few were in shortfall, but those readings predate the latest moves and conditions are softening. Households wanting to understand their own position can consider speaking with a licensed adviser or their lender.