With four rate rises in 2026 and scheduled mortgage payments back around their 2024 peak, the RBA's latest reviews still describe a borrower base that remains largely resilient, and two small percentages explain why.

Two numbers do a lot of work in the RBA's assessment of Australian mortgage holders. Around 2% of variable-rate owner-occupier borrowers are estimated to be in cash-flow shortfall. Fewer than 1% are in negative equity.

Those figures, drawn from the October 2026 Financial Stability Review (FSR) and the minutes of the Monetary Policy Board's September meeting, sit behind the RBA's measured tone on household finances, even after the cash rate target rose to 4.60% on 29 September. This article explains what each number measures, how they have moved, and what they leave out.

Number one: about 2% in cash-flow shortfall

A cash-flow shortfall describes, broadly, a borrower whose income is not enough to cover mortgage repayments and essential living costs. It is a measure of immediate strain, regardless of how much the borrower's home is worth.

The FSR, released on 1 October, says the share of variable-rate owner-occupier borrowers in this position "increased a little over the first half of 2026, but remains relatively low at around 2 per cent". Looking ahead, it projects the share at "a little under 2 per cent for some time".

The September minutes, published on 13 October, put it slightly differently: less than 2% of owner-occupier borrowers faced a cash-flow shortfall. The two descriptions cover the same broad territory, a small minority of borrowers.

Crucially, being in shortfall does not mean a borrower is about to fall behind. The FSR says most borrowers in shortfall have savings to cover it for at least six months.

Number two: under 1% in negative equity

Negative equity means owing more on a home loan than the property is worth. It matters most when a borrower needs to sell, because a sale may not raise enough to repay the loan.

According to the FSR, negative equity currently affects "less than 1 per cent of borrowers". The minutes go further, recording that very few borrowers are in negative equity and that this is likely to remain so even if housing prices fell 20%.

That resilience matters because housing prices are falling. The decision statement says prices have fallen in most capital cities, and the minutes record that they fell more than expected, with staff judging the cumulative fall likely to be greater than assumed in August.

The buffers that support both numbers

Savings are the common thread. Among the figures the RBA has published:

  • Median buffer: the FSR describes "the median borrower able to cover over a year of scheduled mortgage payments at current interest rates", counting offset and redraw balances.
  • By income: the minutes record median savings buffers of just under one year of scheduled repayments in the lowest income quintile and almost two years in the highest.
  • Arrears: housing arrears of 90 days or more have "increased a little over the year to date but remains around pre-pandemic levels".
  • Business arrears: described in the FSR as low.

Governor Michele Bullock highlighted the role of offset accounts at her 29 September media conference: "remember that a lot of people have a mortgage, and then they have an offset account, which sits in the background."

The banking system's capacity to absorb losses adds a further layer. In the FSR's stress test, an adverse scenario with property prices down 20%, unemployment at 6.3% and the cash rate at 5.6% was estimated to lower banks' CET1 capital ratio from 12.4% to around 11.6%. The review states that "The Australian financial system has a good degree of resilience".

What the calm does and does not mean

Small percentages can hide real hardship. Around 2% of a large borrower base still represents many households under pressure, and the averages and medians do not capture every situation.

Several signals in the RBA's own documents point to continuing strain:

  • Scheduled mortgage payments have risen to around 10% of household disposable income, around their 2024 peak, according to the minutes.
  • The cash-flow shortfall share rose a little over the first half of 2026.
  • Lower-income borrowers have thinner buffers, at just under a year of repayments at the median.
  • Unemployment rose to 4.6% in August.

The FSR also notes that smaller businesses and energy-intensive or cyclical sectors are more vulnerable to cost pressures, and that insolvencies are elevated in hospitality, construction and transport, even though they are around their longer-run average overall.

Governor Bullock acknowledged the strain directly: "Now, I know this decision is difficult for households with a mortgage and businesses with loans".

The figures are also snapshots. The shortfall projection is the RBA's estimate rather than a guarantee, and the September rate rise took effect on 30 September. The Board has said it will act as needed, "including increasing the cash rate target further if required."

The borrower numbers form part of the backdrop to the Board's decision to keep tightening. In weighing the case for holding, the minutes cite downside risks to activity and employment and a possibly larger-than-expected effect of falling housing prices. But staff scenario analysis found that "even relatively large falls in housing prices would have only modest direct effects."

Against that, inflation remained the priority. Headline CPI rose 4.0% over the year to August 2026 on the monthly measure, while the trimmed mean, the RBA's preferred underlying measure, was 3.6% over the year to the June quarter. "Higher interest rates are needed to ensure inflation returns to target," Bullock said.

Borrowers who want to understand where they sit relative to these figures may wish to look at their own buffer in months of repayments. Licensed professional advice can help with individual circumstances.

The bottom line

Around 2% of variable-rate owner-occupiers in cash-flow shortfall and fewer than 1% of borrowers in negative equity: those two figures, backed by sizeable median savings buffers and arrears around pre-pandemic levels, underpin the RBA's assessment that households are broadly resilient. They do not mean the squeeze is painless, particularly for lower-income borrowers, and the RBA's projections are estimates that will be tested by the data in coming months.