No end in sight for worst levels of mortgage stress

MORTGAGE stress could hit its highest levels in almost two decades if the Reserve Bank raises interest rates again in November and December, according to new data.

The latest research from Roy Morgan shows 31.8 per cent of mortgage holders are "at risk of mortgage stress" in the three months to September 2026, down 0.5 per centpoints from August 2026, but up a large 7.9 per cent points since January after four interest rate increases from the RBA this year.

After raising interest rates in February, March and May, the RBA elected to leave interest rates unchanged in June and August, before raising them again in late September to a 15-year high of 4.6 per cent.

A share of 31.8 per cent of mortgage holders "at risk of mortgage stress" is equivalent to 1,750,000 people, up a large 566,000 so far this year.

The record high of 35.6 per cent was reached in mid-2008 when official interest rates hit a 30 year high of 7.25 per cent.

"Concerningly, inflation pressures in the Australian economy persist with the latest ABS figures showing CPI at four per cent, well above the RBA’s preferred target range of 2-3 per cent," said Michele Levine, chief executive of Roy Morgan.

“Because of the continuing high level of inflation, Roy Morgan has modelled interest rate increases next week (+0.25 per cent to 4.85 per cent) and in December (+0.25 per cent to 5.1 per cent).

"If the RBA increases rates in November and December, mortgage holders at risk is set to increase to 34.3 per cent of mortgage holders (up 2.5 per cent) and equivalent to 1,887,000 mortgage holders.

“If this were to happen, the level of mortgage stress would be at its highest rate since June 2008 over 18 years ago.”

The number of Australians considered extremely at risk is now numbered at a record high 1,262,000 (23 per cent of mortgage holders) significantly above the long-term average over the last two decades of 16.5 per cent.

The latest figures on mortgage stress show weakness in employment markets negatively impacting levels of household income.

This impact is supported by the latest Roy Morgan unemployment estimates which show over three million Australian workers are either unemployed or under-employed – 3,041,000 (19.4 per cent of the workforce).

Despite the actions of the Reserve Bank, the fact remains the greatest impact on an individual, or household’s, ability to pay the mortgage is not interest rates, it’s if they lose their job or main source of income.

“Mortgage stress is just one indicator of the pressure Australians are under," Levine said.

"The good news is that mortgage stress moderated slightly in September before the RBA increased interest rates at the end of the month.

"The key driver of the moderation of mortgage stress in September was rising household incomes amongst mortgage holders.

“So far this year the RBA has increased interest rates four times which has significantly increased mortgage repayments and, along with other factors such as declining house prices in key markets, and a contracting Australian workforce compared to earlier this year, has steadily increased the pressure on average Australians."