Most Australian Mortgage borrowers are managing higher interest rates, but the strain is far from evenly shared.

The Reserve Bank of Australia’s October Financial Stability Review finds that savings, housing Equity and employment continue to support borrowers. Its overall assessment is reassuring about the financial system’s capacity to withstand shocks, while acknowledging that some households face hardship.

Savings Are Helping Borrowers Keep Up

Around 2 per cent of variable-rate owner-occupier borrowers were estimated to have insufficient income to cover scheduled mortgage repayments and essential spending. That share increased slightly during the first half of 2026.

Most borrowers facing this shortfall were estimated to have savings sufficient to cover the gap for at least six months, assuming spending was reduced to essentials.

Across borrowers more broadly, the median offset and redraw buffer could cover more than a year of scheduled mortgage payments at prevailing rates.

Housing Equity Provides a Different Kind of Protection

Fewer than 1 per cent of borrowers were estimated to owe more than their home was worth. In a separate scenario involving a further uniform 20 per cent fall in housing prices, around 5 per cent of mortgages would enter negative equity.

Equity and repayment capacity are different measures. A household can have substantial equity while struggling with monthly bills. Conversely, Negative equity does not automatically cause default if repayments remain affordable.

The Pressure Is Greater for Some Households

Arrears were higher among borrowers with lower incomes or larger debts relative to income or property values. Lower-income renters also face particular pressure because essential expenses absorb more of their budgets.

For these households, keeping payments current can still involve difficult choices. A low arrears rate does not measure how much discretionary spending has been cut or how little room remains for an unexpected expense.

Stress Tests Explore Possible Outcomes

The review also examines severe hypothetical shocks to employment, Inflation and interest rates. These exercises assess resilience under adverse conditions; their assumptions are not forecasts or signals of the RBA’s intended rate path.

Household Budgets Remain the Practical Test

For an individual borrower, the useful starting point is their actual repayment, essential expenses and accessible savings. The cash rate influences mortgage pricing, but lenders set customer rates and Loan conditions.

A repayment buffer also needs careful interpretation: money available in an offset account and access to redraw can be subject to different product arrangements.

The next Financial Stability Review is scheduled for 25 March 2027, according to the RBA’s published timetable.