RBA Keeps Cash Rate Steady Amid Mounting Mortgage Stress

Mortgage holders in Australia are facing increasing repayment stress as interest rates remain high. The Reserve Bank of Australia (RBA) has left the door open to further rate hikes, citing concerns about inflation and the labor market.

The RBA's minutes from its recent Monetary Policy Board Meeting show that mortgage payments as a share of household disposable income are near their 2024 peak. Despite this, households have been able to absorb these costs, thanks in part to prepayment buffers they can draw upon if needed.

The central bank is worried about the potential for further inflationary pressures, including an AI investment boom or demand not falling fast enough to crush inflation. While there was no argument to cut interest rates, some board members argued that raising the cash rate target by 25 basis points at this meeting could help mitigate these risks.

The RBA has already lifted the cash rate three times in 2026, by a total of 75 basis points. The current cash rate stands at 4.35 per cent, and the central bank believes that this is 'sufficiently restrictive' to bring inflation back to target by 2027.