1.6 Million Borrowers at Risk as Mortgage Stress Peaks

Roy Morgan's latest data shows mortgage stress has reached a two-year high, with more rate hikes potentially on the way before year's end.

Nearly one in three Australians with a home loan is now classified as at risk of mortgage stress — and the pressure is still building.

Roy Morgan's rolling three-month figures to June 2026 show 30.3% of owner-occupied mortgage holders are now at risk, equivalent to 1.6 million Australians. That is a rise of 68,000 people in a single month and the highest proportion recorded since the amended Stage 3 income tax cuts took effect at the end of June 2024.

The figures arrive after one of the sharpest tightening cycles in recent memory. The Reserve Bank of Australia raised the cash rate three times in 2026 — in February, March, and May — by a combined 0.75 percentage points, pushing it to 4.35%. Those moves reversed two rate cuts made in 2025 and have added meaningfully to monthly repayments for borrowers on variable rates.

"Mortgage stress is up five months in a row," said Michele Levine, chief executive of Roy Morgan. "Interest rates have increased three times already this year, housing prices are coming down in key markets, and the Australian workforce has contracted from earlier this year."

The Numbers Behind the Stress

Roy Morgan classifies a mortgage holder as at risk when repayments exceed a set threshold of household income. A more severe subset — those for whom even interest-only payments breach that threshold — are classified as extremely at risk. In June 2026, 20.7% of owner-occupied mortgage holders, or almost 1.1 million Australians, fell into this category. The long-term average for that measure over the past two decades is 16.4%, placing today's figures well above historical norms. The all-time high of 35.6% was recorded in May 2008 during the Global Financial Crisis.

Roy Morgan has modelled what happens if the RBA continues tightening. If the cash rate rises to 4.6% in August, the share of at-risk mortgage holders would climb to 31.2%, equivalent to 1.65 million people. A further increase to 4.85% in September would push the figure to 31.4%, or 1.67 million — a level not seen since December 2008.

The tightening cycle was triggered by a surge in inflation: the official annual rate climbed from 1.9% in the year to June 2025 to 4.6% in the year to March 2026. More recent data shows some easing, with the Consumer Price Index for the 12 months to May 2026 falling to 4%.

What the Jobs Data Means for Rate Relief

Whether further rate rises materialise depends heavily on the labour market. June employment data published by the Australian Bureau of Statistics showed the unemployment rate unchanged at 4.4% and employment rising by 76,000 people, with the participation rate climbing 0.3 percentage points to 67%.

"In June, we recorded a 76,000 person rise in employment, driven by a 47,000 person rise in part-time employment," said Sean Crick, ABS head of labour statistics. The underemployment rate rose 0.2 percentage points to 6.5%, while hours worked were up 0.2% on the month and 1.8% annually. Annual employment growth of 1.7% from June 2025 points to an economy that has not yet softened sufficiently to prompt aggressive monetary easing.

For the RBA, a tight jobs market means wage and price pressures remain elevated — making it harder to pivot toward cuts. On the question of the next move, the big four banks are divided: Westpac continues to forecast two further cash rate increases, one at the August meeting and a potential second in September, while CBA, NAB, and ANZ hold the view that the cash rate has already peaked. All four, however, expect the RBA to begin cutting rates next year.

Levine emphasised that income and employment remain the most significant driver of mortgage stress outcomes. "The employment market has been strong over the last four years," she said, but cautioned that workforce contraction in recent months has begun to erode that buffer.

What Borrowers Should Do Before August 11

The RBA's next cash rate decision falls on 11 August. With the major banks split on the outcome and mortgage stress already at a two-year high, understanding your options before that meeting — rather than reacting after it — puts you in a stronger position.

If your repayments are stretching your budget, the first step is checking whether your current rate is still competitive. Lenders regularly adjust pricing for new customers, and many existing borrowers are paying more than necessary. Our refinance savings calculator lets you model how much a rate reduction could put back in your pocket each month — even a 0.3 percentage point improvement can amount to thousands of dollars annually on a typical balance.

The second step is understanding your current borrowing position. With the cash rate at 4.35%, the affordability picture looks materially different to 12 months ago. Our borrowing power calculator will give you an updated read on what you can genuinely service at today's rates.

If you are ready to explore switching, our home loans refinance hub lists current products across a range of lenders and can help you compare options based on your loan size and property value.

Levine's broader observation is worth sitting with: the 115,000-person rise in at-risk mortgage holders over the past 12 months occurred against a backdrop of strong employment. If the labour market softens further, the buffer that has kept the stress figure below its 2008 peak could erode quickly. Getting ahead of that now is not just prudent — for households where repayments have already become difficult, it may be necessary.

MPA Australia reports on the Roy Morgan mortgage stress data and RBA rate outlook.