RBA: Most Mortgage Holders Can Weather a Property Fall
The Reserve Bank's October stability review finds most borrowers can absorb price falls, but the cash rate is now sitting at 4.6%.
The Reserve Bank of Australia raised the cash rate by 25 basis points to 4.6% on 29 September — its fourth rate rise of 2026 — and the following day published its October Financial Stability Review, reassuring most mortgage holders that they remain in a stronger position than many fear.
The headline finding, as Australian Broker reports, is that "most borrowers, including households and businesses, are well positioned to manage through a period of slowing economic growth and declining housing prices." It's the kind of language the RBA doesn't use lightly.
What the RBA Found About Mortgage Stress
Mortgage arrears have edged higher, but remain near pre-pandemic levels — a significant distinction. Borrowers on lower incomes or with high loan-to-value or loan-to-income ratios continue to show slightly higher arrears than the broader market, but their arrears have not risen significantly this year and they account for only a sliver of the market.
The RBA estimates that only around 2% of variable-rate owner-occupier borrowers have income that falls short of their scheduled repayments plus essential living costs. Even within that 2%, most could cover the gap from savings for at least six months if they cut spending to essentials.
Offset accounts and redraw facilities are doing a lot of the heavy lifting here. The median mortgage holder could meet more than a year of scheduled repayments from these balances at current rates — a materially stronger buffer than Australians carried into COVID-19.
National home values fell 1.1% in September alone, leaving them 5.2% below their March 2026 peak, according to Cotality's latest figures. The RBA acknowledged this decline is well under way. First-home buyers are not showing particular signs of strain — the RBA's liaison with banks suggests hardship among participants in the Australian government's 5% Deposit Scheme remains contained.
That said, household budgets have come under pressure. Higher inflation and recent rate rises were the main drivers behind real disposable income per person slipping over the first half of 2026. Calls to the National Debt Helpline rose modestly over the same period.
The RBA's message to lenders was pointed: lending standards must "remain sound in the face of ongoing strong competition in lending", with the central bank warning that resilience should not be eroded at a time when external shocks are more likely.
Are Rate Rises Finished? What CBA's CEO Thinks
There is a reason mortgage holders are watching October's quarterly inflation data so closely. Commonwealth Bank chief executive Matt Comyn told ABC News he believes the Reserve Bank has finished hiking rates for now, but stopped short of ruling out a November move.
"We believe that's the last [rate rise], but certainly I think the last meeting of this calendar year is live," Comyn said. The next quarterly inflation figures are due at the end of October, and the RBA's November 3 board meeting follows shortly after.
Comyn noted some cautious optimism for property owners with a longer view. When rates last peaked in 2023, national house prices fell 8.2%. The current expectation is an estimated 10% drop from peak to trough — steeper — but Comyn pointed out that prices bounced back when rates fell last cycle and are expected to follow the same pattern. "Housing is a very important asset in Australia. I think it's 57 per cent of household wealth in the country," he said.
CBA also reported 13% growth in business lending across the 2026 financial year, and doubtful debts remain well below long-run averages — largely, Comyn said, because unemployment is still low.
What You Should Do Right Now
If you're on a variable rate, the first step is modelling whether your repayments remain manageable if the RBA delivers one more 25-basis-point rise. Use our repayment calculator to run that scenario before the November 3 decision.
Keep your offset account topped up. It is your most powerful buffer against rate volatility — and the RBA's own data confirms it is what separates most mortgage holders in difficulty from those who are coping.
With lenders competing aggressively for new business, your existing rate may no longer reflect what's on offer. Use our refinancing savings calculator to see whether switching could cut your monthly outgoings meaningfully.
For those considering buying, the current market presents a more complicated picture: prices are falling, but borrowing costs are high. Check today's cheapest home loan rates to understand where the competitive edge sits. First-home buyer lending has reached 29.0% of owner-occupier lending — slightly above the decade average of 27.6% — suggesting a cohort of buyers has decided that falling prices create opportunity rather than risk.
The RBA is not predicting a financial crisis. Its assessment is that domestic cyclical risks are not systemic at this stage. Banks hold enough capital to continue lending through a downturn. But the message for individual borrowers is clear: know your buffers, check your rate, and watch the October inflation data.