The RBA's October 2026 Financial Stability Review says serious housing arrears have edged up this year but remain around pre-pandemic levels, and the reasons why matter as much as the trend.

Falling three months behind on a home loan is one of the clearest signs that a household's finances have broken down. It is also one of the measures the RBA watches most closely when it assesses whether rising interest rates are causing lasting damage.

So how many borrowers are in that position, and is the number climbing? The RBA's answer, in its October 2026 Financial Stability Review (FSR), released on 1 October, comes in two parts. Housing arrears of 90 days or more have "increased a little over the year to date but remains around pre-pandemic levels".

That sentence is short, but each half carries information. This article unpacks it, using only the RBA's published characterisation rather than a precise percentage.

What "90 days or more" measures

A loan is generally described as in arrears when scheduled repayments have been missed. The 90-day threshold separates brief lapses, such as a missed payment during a change of job, from more sustained difficulty. Loans in arrears for that long are typically treated by lenders as non-performing.

The measure has a feature that is easy to overlook: it lags. A borrower who comes under pressure today may draw on savings, use an offset or redraw balance, or cut other spending for months before missing payments. By the time someone reaches 90 days behind, the strain has usually been building for some time.

That is why the RBA reads arrears alongside earlier warning signs, rather than in isolation.

Is the number rising?

On the RBA's account, yes, but only modestly. The phrase "increased a little over the year to date" signals an upward drift during 2026, the same year in which the Monetary Policy Board has raised the cash rate four times, according to Governor Michele Bullock. The most recent increase, on 29 September, took the cash rate target to 4.60%.

The second half of the sentence provides the context. Arrears "remains around pre-pandemic levels", which places current conditions within a range the financial system has experienced before, rather than at an extreme. The FSR's broader verdict is that "The Australian financial system has a good degree of resilience", although the accompanying media release says global and operational vulnerabilities are growing.

Two other features of the RBA's assessment are relevant:

  • Business arrears are low, according to the FSR.
  • Problem housing loans are well secured. Over 90% of non-performing housing loans were well secured as at June 2026, meaning collateral is expected to cover much of what is owed.

The earlier warning signs

Because arrears lag, the RBA's measures of current strain help indicate where they might head. The FSR and the minutes of the Board's September meeting provide several:

  • Cash-flow shortfall. The share of variable-rate owner-occupier borrowers in shortfall "increased a little over the first half of 2026, but remains relatively low at around 2 per cent". The FSR projects it at "a little under 2 per cent for some time".
  • Time to cover a shortfall. Most borrowers in shortfall have savings to cover it for at least six months.
  • Savings buffers. The FSR describes "the median borrower able to cover over a year of scheduled mortgage payments at current interest rates", counting offset and redraw. The minutes record median buffers of just under one year in the lowest income quintile and almost two years in the highest.
  • Negative equity. Fewer than 1% of borrowers are in negative equity, and the minutes say very few would be even if housing prices fell 20%.
  • Repayment burden. Scheduled mortgage payments have risen to around 10% of household disposable income, around their 2024 peak.

These indicators help explain why rising rates have not translated into a sharp rise in serious arrears so far. Many borrowers have room to absorb higher repayments before falling behind.

What could change the picture

Timing is one consideration. Bullock has said rate changes take about 12 to 18 months to have their full effect, so on that timeline the increases made earlier in 2026 would still be feeding through to household budgets.

Jobs are another. In general, a borrower who loses income is far more likely to fall behind than one who simply faces higher repayments. That makes the labour market a key indicator to watch.

Unemployment rose to 4.6% in August, alongside a rise in participation, though members of the Board cautioned about interpreting labour force data because of survey methodology changes. Governor Bullock noted that "the unemployment rate is still quite low historically". The RBA's August forecasts had unemployment rising gradually to 4.8% by the end of 2028.

Housing prices are another factor. They have fallen in most capital cities, and staff judge the cumulative fall is likely to be greater than assumed in August. Even so, the minutes record staff scenario analysis finding that "even relatively large falls in housing prices would have only modest direct effects."

The banking system has also been tested against a much harsher environment. In the FSR's adverse scenario, with unemployment rising to 6.3%, the cash rate at 5.6% and property prices down 20%, banks' CET1 capital ratio was estimated to decline from 12.4% to around 11.6%.

Borrowers who are finding repayments difficult may wish to understand what hardship arrangements their lender offers, and can seek licensed professional advice about their own situation.

The bottom line

The RBA's answer to "how many borrowers are three months behind?" is a qualitative one: housing arrears of 90 days or more have increased a little this year but remain around pre-pandemic levels. Because arrears lag, the RBA also watches earlier indicators, and those show around 2% of variable-rate owner-occupiers in cash-flow shortfall, sizeable median buffers and very little negative equity. The Board has said it will raise rates "further if required", and the labour market is among the indicators that will show whether the gentle upward drift in arrears continues.