The share of Australian mortgage holders considered at risk of mortgage stress climbed to 29% in May, according to new data from Roy Morgan — the fourth consecutive monthly increase, and the highest level since the Reserve Bank began cutting rates in mid-2025.
The figure is equivalent to 1,538,000 people, up 65,000 on April and 100,000 higher than a year ago. The increase follows the Reserve Bank's decision to raise the official cash rate by 0.25 percentage points to 4.35% in early May — the third hike of 2026, after increases in February and March. The RBA subsequently left rates on hold at its June meeting.
The cumulative cost of those three moves is tangible for borrowers. According to Canstar, the three 2026 hikes have added approximately $272 per month to repayments on a $600,000 loan — roughly $3,265 in extra annual repayments if rates now stay on hold.
Of particular concern is the proportion of borrowers classified as "extremely at risk" — those for whom even interest-only repayments would consume an unsustainable share of household income. That cohort now stands at 1,084,000, or 20.4% of mortgage holders, well above the two-decade long-term average of 16.4%.
Roy Morgan CEO Michele Levine (pictured) noted the broader context bearing down on household finances.
"Mortgage stress is just one indicator of the pressure Australians are under — mortgage stress is up four months in a row, interest rates have increased three times already this year, housing prices are coming down in key markets, and the Australian workforce has shrunk for three straight months," Levine said in a media release.
Roy Morgan has modelled the potential impact of a further 0.25 percentage point rate rise at the RBA's August meeting, which would lift the cash rate to 4.6% — the highest level in nearly 15 years.
Under that scenario, the share of mortgage holders at risk would rise to 30.2%, affecting 1,600,000 people — up 62,000 from current levels. Even without an August increase, the May rise is expected to continue flowing through, pushing the at-risk share to an estimated 29.5% by July.
Levine said the inflation picture offered some tentative relief.
"There is good news with regards to inflation with the latest ABS Consumer Price Index for the 12 months to April 2026 at 4.2%, down 0.4% points from March 2026 (4.6%) as tensions in the Middle East eased."
The rate cycle that produced the current stress levels has been sharp. The RBA cut rates three times during 2025 before reversing course entirely in 2026. The net result is that rates are now 0.5 percentage points higher than they were in May 2025.
The stress figures also have a direct implication for broker clients considering refinancing. Canstar analysis shows the cumulative reduction in borrowing capacity from the 2026 hikes so far is roughly $25,000 for a single average-income borrower and $49,000 for a couple — with a potential fourth hike pushing those figures to $37,000 and $73,000 respectively.
Levine cautioned against reading the stress figures as purely a rate story.
"It is important to appreciate that interest rates are only one of the variables that determines whether a mortgage holder is considered 'at risk' — the largest impact on whether a borrower falls into the 'at risk' category is related to household income — which is directly related to employment," she said.
On that measure, the picture is mixed. Roy Morgan's May employment estimates show the workforce has contracted for three consecutive months, while overall unemployment and underemployment stands at more than 3.2 million workers — 20.2% of the workforce. At the same time, Levine noted that nearly one million jobs have been created since May 2022, providing an underlying buffer that has helped moderate stress levels relative to the rate environment.
The 20.4% of mortgage holders now classified as extremely at risk — well above the long-term average of 16.4% — is a reminder that for a significant cohort, the pressure has moved beyond precautionary. The all-time stress peak of 35.6% was recorded during the Global Financial Crisis in mid-2008; current conditions remain well short of that threshold, though the employment trend bears watching.
Get the hottest and freshest property and mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
