Mortgage stress climbs to two-year high after RBA rate rise

Nearly one-third of Australian mortgage holders are now at risk of mortgage stress, according to new data from Roy Morgan, following the Reserve Bank of Australia's decision to raise interest rates by 0.25 percentage points to 4.35% in May.

The research firm's latest figures show 30.3% of owner-occupied mortgage holders or equivalent to 1.6 million people were classified as "at risk" in the three months to June 2026.

That represents a rise of 1.3 percentage points from May and an increase of 68,000 people on the previous month. It is the highest level recorded since the amended Stage 3 income tax cuts took effect at the end of June 2024.

The RBA held rates steady at its mid-June meeting after lifting them three times in 2026 — in February, March, and May — by a combined 0.75 percentage points. Those increases reversed two cuts made in 2025 and pushed the cash rate 0.5 percentage points above its level of 3.85% in June 2025, contributing to a rise in at-risk mortgage holders of 115,000 year-on-year.

The proportion classified as "extremely at risk" — those for whom even interest-only repayments exceed a set threshold of household income — stood at 20.7%, or almost 1.1 million people. Roy Morgan notes the long-term average for this measure over the past two decades is 16.4%. The all-time high of 35.6% was recorded in May 2008 during the Global Financial Crisis.

Roy Morgan has modelled the potential effect of additional rate rises at the RBA's August and September meetings. If the cash rate rises to 4.6% in August, the share of at-risk mortgage holders would climb to 31.2%, or 1.65 million people. A further rise to 4.85% in September would push the figure to 31.4%, equivalent to 1.67 million — a level not seen since December 2008.

The RBA's tightening cycle this year was driven by a surge in inflation, with the official annual rate rising 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%.

"Mortgage stress is just one indicator of the pressure Australians are under," said Michele Levine (pictured right), chief executive of Roy Morgan. "Mortgage stress is up five months in a row, 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."

Levine added that Roy Morgan had modelled potential further RBA cash rate increases of 0.25 percentage points in August, to 4.6%, and again in September, to 4.85%, which would take official interest rates to their highest level in nearly 20 years.

She, however, emphasised that interest rates were only one of the variables determining whether a mortgage holder fell into the at-risk category, with household income — and by extension employment — having the greatest impact.

"The employment market has been strong over the last four years (Roy Morgan estimates show almost 1 million new jobs have been created since the Albanese Government was elected in May 2022), and this has provided support to household incomes which have helped to lower levels of mortgage stress despite interest rates being significantly higher than in May 2022. However, the latest employment estimates show the workforce contracting in recent months from earlier this year," Levine said.

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