Employment trends remain central to repayment capacity
Mortgage stress remains near a three-year low, but modelling shows the number of borrowers at risk would rise by 41,000 if interest rates increase to 3.85% in February.
Roy Morgan research shows 24.7% of owner-occupied mortgage holders were classified as “At Risk” in the three months to November 2025, equivalent to 1,249,000 borrowers. The proportion is unchanged heading into January after the Reserve Bank left rates on hold in December and is the lowest level recorded since January 2023.
The research firm modelled the effect of a 0.25 percentage point rate increase at the Reserve Bank’s February 2026 meeting, which would lift the cash rate from 3.6% to 3.85%. Under that scenario, the share of mortgage holders “At Risk” would rise to 25.5%, or about 1,290,000 borrowers, an increase of 0.8 percentage points or 41,000 people.
The modelling follows a reversal in inflation conditions during the second half of 2025. After annual inflation reached 1.9% in the year to June 2025, it climbed to 3.4% in the year to November, based on ABS monthly estimates. Roy Morgan said the change reduced the likelihood of further rate cuts after three reductions in 2025 totalling 0.75%.
Despite the recent easing, cumulative pressure from earlier tightening remains. Since May 2022, when the Reserve Bank began lifting rates, the number of Australians “At Risk” of mortgage stress has increased by 442,000. Over that period, official rates rose by a total of 4.25%, from 0.1% to a peak of 4.35%, before easing last year.
Within the November results, 852,000 borrowers, or 16.8% of mortgage holders, were considered “Extremely At Risk”, slightly above the long-term average of 16.3% over the past two decades. The current level remains well below the historical high of 35.6% recorded in mid-2008.
Roy Morgan defines mortgage stress by comparing repayments with after-tax household income. Borrowers are considered “At Risk” when repayments exceed between 25% and 45% of income, depending on income and spending. “Extremely At Risk” borrowers are those whose interest-only repayments exceed the same thresholds.
Employment conditions remain a major factor affecting repayment capacity. Roy Morgan estimates show 3,337,000 Australians, or 20.9% of the workforce, were unemployed or under-employed in November, marking the 12th consecutive month above three million.
