RBA Review Shows Most Mortgage Holders Prepared for Economic Challenges

The Reserve Bank of Australia (RBA) released its October 2026 Financial Stability Review, concluding that most Australian mortgage holders are financially equipped to handle tougher economic conditions. The review, published on October 1, follows a cash rate hike on September 29, raising the target to 4.60 percent. Governor Michele Bullock acknowledged the difficulty of the decision for mortgage holders but emphasized that the review would provide insight into financial vulnerabilities.

The RBA's assessment is based on multiple indicators, including cash flow, savings buffers, home equity, and arrears. Approximately 2 percent of variable-rate owner-occupier borrowers are experiencing cash-flow shortfalls, but the median borrower has savings buffers sufficient to cover over a year of mortgage payments. Less than 1 percent of borrowers owe more on their loans than their property is worth, and arrears remain around pre-pandemic levels.

While the overall outlook is positive, a small group of borrowers is under genuine pressure. Around 2 percent of variable-rate owner-occupiers struggle to cover mortgage repayments and essential expenses. The RBA also modeled a severe downturn scenario, where the share of higher-risk borrowers would increase to around 5 percent, but even then, two-thirds would still have buffers to service their debts for at least six months.

The review concludes that Australian banks are well-positioned to continue lending even in a downturn, indicating resilience in the financial system. The next key dates for borrowers to watch are the CPI update on October 28 and the RBA's monetary policy decision on November 3.