The overwhelming majority of Australians with a mortgage are in a strong position to weather any future economic shocks, according to the Reserve Bank of Australia.
The RBA’s latest Financial Stability Review shows that only around one in a hundred households with a mortgage are behind on their repayments and so-called “mortgage stress” is easing.
The review comes as household savings climbed to a new high of $1.66 Trillion in September 2025.
The findings suggest there’s unlikely to be a mass “fire sale” of homes if the next interest rate move by the Reserve Bank is up.
The details
The central bank’s twice-yearly financial stability assessment found that households are being buoyed by lower inflation, falling interest rates and tax relief, with the number of mortgage holders in arrears at its lowest level since 2022.
“Households’ balance sheets have strengthened over recent years, and financial pressures are expected to continue easing gradually,” the RBA review says.
“A period of lower interest rates will assist indebted households.”
According to the Financial Stability Review, only about 0.7% of mortgage holders are more than 90 days behind on repayments, down sharply from a peak in late 2024.
That figure is now back to pre-pandemic levels, marking a turning point after several difficult years of rising costs and rate hikes to tame inflation.
PropTrack Finance Editor Hope Coumbe says the data paints “a positive picture of household resilience,” with most borrowers “still able to pay their mortgages and have equity left over in the event of a major economic downturn.”
The RBA review noted that Australia’s total housing debt sits below $3 trillion, compared to the total value of the housing market, which has now reached $12 trillion.
That ratio has led the RBA and other financial regulators to agree that “housing market risks are currently under control.”
Strong savings buffers
The RBA review also shows that Australian households have continued to build savings buffers, even as required mortgage payments have fallen following the RBA’s three rate cuts in February, May and August of 2025.
Many households are paying extra into offset and redraw accounts, while current buffer levels remain well above historical averages - and higher than most comparable countries.
The RBA estimates that the bottom quarter of mortgage holders, on average, have enough in reserve to cover 10 months of repayments, while the top quarter could cover up to 20 months.
Separate research by comparison site Canstar.com.au shows household savings have climbed to a new high of $1.66 Trillion in September 2025, with Australians piling an extra $12 billion into their accounts in a single month.
Canstar analysis of APRA’s Monthly Authorised Deposit-taking Institution (ADI) statistics for September shows households grew their savings by 1% in the month and 9% compared to the same time last year.
Equity gains
Rising property prices have also strengthened mortgage holders’ positions.
Home values have climbed about 10% since the RBA began its rate-tightening cycle in 2022, reducing the share of borrowers in negative equity to less than 1%.
PropTrack’s Hope Coumbe says this “wealth effect”, where consumers spend more because rising home values make them feel richer, is already evident in household spending data.
Improved affordability and confidence have seen households become more willing to take on new debt this year.
Hope Coumbe says rate cuts have increased borrowing capacities and boosted confidence, while the government’s expanded Home Guarantee Scheme - now open to buyers on any income with as little as a 5% deposit - has added fuel to already fierce competition in the housing market.
However, she warns that highly leveraged borrowers remain the most vulnerable to economic shocks.
“Those with high loan-to-value or high loan-to-income ratios are least resistant in the event of a downturn,” she says.
Rate cuts may be nearing their end
While most households are benefiting from recent interest rate relief, analysts warn the RBA’s easing cycle may be at an end.
Commonwealth Bank expects the cash rate to remain on hold indefinitely, while money markets are only pricing in around a 40% chance of any interest rate cuts next year.
With the economy still growing slowly - 2024-25 was Australia’s weakest financial year for growth since the early 1990s - the next RBA review could bring a more cautious tone.
For now, though, Hope Coumbe says Australians “appear on the whole to be in a sufficiently comfortable position.”
“After years of strain, mortgage holders have used lower rates to rebuild buffers and strengthen their balance sheets,” she says.
“The challenge now is to stay disciplined - because even good times don’t last forever.”