Australian households are carrying one of the heaviest home loan interest burdens in four decades, according to new KPMG analysis of ABS data, with recent conditions arguably tougher than the notorious late-1980s rate spike.
Interest payments climbed from a record low of 2.6% of household income in early 2022 to a peak of 5.9% by December 2023, as the Reserve Bank lifted the cash rate from 0.1% to 4.35%. By contrast, the 1989–90 inflation spike — when the cash rate hit 17.5% — saw interest payments peak at 5.7%.
KPMG senior economist Terry Rawnsley (pictured) said the historical narrative doesn't match the data: "the data shows that borrowers have actually faced tougher conditions over the past few years."
Rawnsley noted the more painful period for households was actually the GFC, when the burden hit a high of 7.9% in mid-2008 under Gen X borrowers, since "central banks effectively lost control of interest rates" as global markets froze up, rather than the RBA "deliberately tapping the brakes."
Victoria's interest burden of 6.9% of income is the highest in the country — well above South Australia (5.7%), NSW (5.6%), Queensland (5.5%) and WA (5.3%), all of which sit below the 5.8% national average.
Rawnsley said this reflects affordability success rather than distress: "Victoria's more affordable homes have lifted homeownership and subsequently pushed the average interest repayments up to 6.9%, well above other states."
The ACT, Tasmania and the Northern Territory remain under 5%, reflecting both lower prices and lower home ownership rates.
Households paid $33.6 billion in interest in the March quarter — the fourth-highest total on record — as three 2026 rate rises reversed earlier relief, pushing the burden to 5.4% from 5.2% the previous quarter.
Rawnsley warned that "another interest rate rise will see interest repayments head towards 6% of household income," adding that mortgage repayments are becoming "a source of financial anxiety" for many borrowers rather than security.
That anxiety is already showing up in borrower-level data: Roy Morgan puts the share of mortgage holders at risk of stress at 29% in May — 1.54 million people, the fourth straight monthly rise — with a further rate rise in August projected to push that to 1.6 million.
In dollar terms, the pressure is concrete: Canstar estimates the three 2026 cash rate rises have added roughly $272 a month, or $3,265 a year, to repayments on a $600,000 loan.
Read the full KPMG analysis, including state-by-state charts and historical comparisons, on the KPMG website.
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