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Assistant Governor (Economic) Sarah Hunter has pointed to a sizeable group of borrowers who are well ahead on their home loans, a reminder that higher interest rates do not land evenly across mortgaged households.

The Reserve Bank of Australia (RBA) lifted the cash rate target by 25 basis points to 4.60 per cent on 29 September, its fourth increase of 2026. For many households the natural question is how much room borrowers have to absorb the change. One of the more striking answers came a week earlier, from Assistant Governor (Economic) Sarah Hunter.

Speaking on The Pay Off podcast with Sylvia Jeffreys on 22 September, Ms Hunter said that just over 40 per cent of households with mortgages are two or more years ahead on their mortgage payments. She also said that around 30 per cent of Australians have mortgages. That helps put the debate in context: the direct effect of higher mortgage rates falls on a minority of Australians, and within that group a large share has already built a substantial head start.

Ms Hunter linked the point to how mortgages work. According to her remarks, when the RBA raises rates a borrower's minimum repayment goes up, but most borrowers have offset or redraw accounts and can choose to put more in. Her comments suggest that being ahead reflects money borrowers have paid or set aside beyond what their loan requires.

That distinction matters. A borrower who is two years ahead has a cushion to draw on if circumstances change, whether that is a higher repayment after a rate rise or a disruption to income. A borrower who is only meeting the minimum has less room for error.

Ms Hunter was careful not to suggest the picture is uniformly comfortable. She said she saw no signs of systemic financial distress, though individuals can struggle if their income changes. In other words, a strong aggregate position does not rule out hardship for particular households.

How the Financial Stability Review measures the cushion

The RBA's October 2026 Financial Stability Review (FSR), released on 1 October, approached household buffers from a slightly different angle. Rather than counting the share of households beyond a two-year threshold, it looked at the median borrower.

The Review estimated that offset and redraw balances leave "the median borrower able to cover over a year of scheduled mortgage payments at current interest rates from these buffers". It also said this position is stronger than it was before the pandemic.

The two measures are not the same statistic and should not be merged. Ms Hunter's figure describes how many mortgaged households are two or more years ahead; the FSR figure describes the buffer held by the borrower in the middle of the distribution. Read together, though, they point in the same direction: a substantial part of the mortgage market entered this year's rate rises with savings in reserve.

The Review's overall assessment was that "Most Australian households with mortgages remain well placed to manage more difficult conditions".

The other end of the distribution

If just over 40 per cent of mortgaged households are two or more years ahead, it follows that a little under 60 per cent are not. The FSR offers some insight into the group under the most pressure.

It reported that the share of variable-rate owner-occupier borrowers experiencing a cash flow shortfall, meaning their income is not sufficient to cover scheduled mortgage repayments and essential expenses, "increased a little over the first half of 2026, but remains relatively low at around 2 per cent". The RBA projected the share to stay a little under 2 per cent for some time, and estimated that most of those in shortfall have at least six months of savings.

The Review also said that arrears of 90 days or more increased a little over the year to date but remain around pre-pandemic levels.

Governor Michele Bullock acknowledged the strain at her media conference after the September decision. "I know this decision is difficult for households with a mortgage and businesses with loans," she said. She also said that scheduled mortgage payments, including interest, are back up to around 10 per cent of household disposable income.

Why buffers matter for policy

Buffers do more than protect individual households. They can also shape how quickly monetary policy works its way through spending.

Ms Bullock said at the media conference that "it can take 12, perhaps even 18 months" for the full effect of rate changes to come through. Households with large offset balances may be able to absorb a higher minimum repayment without cutting spending sharply, while those with thin buffers may have to adjust sooner.

The Monetary Policy Board's statement on 29 September noted: "There are signs that growth in consumer spending is easing gradually as expected." The Board also said it "will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed."

Ms Hunter framed the broader objective in household terms. She said the goal is for the cost-of-living squeeze to fade into the background as inflation eases.

Questions borrowers may wish to consider

Ms Hunter's comments describe the aggregate, not any individual loan. Borrowers who want to understand where they sit may find it useful to consider:

  • how far ahead of their scheduled repayments they are, if at all;
  • whether their loan has an offset or redraw facility, and how it works;
  • how their minimum repayment has changed after this year's rate increases; and
  • how their position would look if their income changed.

Borrowers may also wish to check their loan terms with their lender.

The bottom line

Ms Hunter's remark that just over 40 per cent of mortgaged households are two or more years ahead on their payments helps explain why the RBA continues to describe the household sector as broadly resilient, even after four rate increases this year. The FSR's finding that the median borrower holds more than a year of scheduled payments in offset and redraw buffers reinforces that view.

But the averages conceal a spread. Around 2 per cent of variable-rate owner-occupiers are in cash flow shortfall, and Ms Hunter herself noted that individuals can struggle if their income changes. The next markers to watch are the minutes of the September meeting on 13 October and the Board's next decision on 3 November.