Mortgage stress among Australian borrowers has fallen to its lowest level in almost three years, with new Roy Morgan research showing stress “dropping to a three-year low” – but CEO Michele Levine (pictured) warns the improvement “may not last” if inflation and interest rates turn higher again.
Roy Morgan’s study covering the three months to November 2025 found the share of borrowers considered “at risk” of mortgage stress has eased back to early‑2023 levels after last year’s rate cuts, even as broader housing pressures remain intense and new‑home building continues to lag demand for both buyers and renters.
New figures show 24.7% of mortgage holders were “at risk” of mortgage stress in the three months to November 2025, down 3.2 percentage points from August 2025. This is the lowest share of “at risk” mortgage holders since January 2023 and well below the record high of 35.6% reached in mid-2008.
However, the total number of Australians in difficulty remains elevated compared to before the RBA’s rate-hiking cycle began in May 2022. Since then, the number of mortgage holders “at risk” has increased by 442,000 as the cash rate climbed from 0.1% to 4.35% between May 2022 and November 2023.
The number of Australians considered “extremely at risk” is now 852,000 (16.8% of mortgage holders), which is just above the long-term average over the last two decades of 16.3%.
The Reserve Bank cut interest rates in February, May, and August last year by a total of 0.75% to 3.6%, responding to lower inflation estimates earlier in 2025.
However, after annual inflation hit a low of 1.9% in the year to June 2025, it has almost doubled, with the latest figure at 3.4% in the year to November 2025. The sharp increase in inflation in the second half of 2025 means further interest rate cuts are now off the table, and the latest forecasts are for interest rates to increase in 2026.
Levine noted inflation has “re-accelerated… almost doubling, up by 1.5% points, in the last five months”, a rebound that has prompted RBA to leave rates unchanged at its October, November, and December meetings and makes an increase the most likely next move.
Because of this, Roy Morgan has modelled the impact of RBA increasing interest rates at its next meeting in February 2026 by 0.25 percentage points to 3.85%.
The decision to leave interest rates on hold in December means the share of mortgage holders “at risk” is set to remain unchanged in January. If the Reserve Bank were to increase interest rates in February by 0.25% to 3.85%, the share of mortgage holders “at risk” would rise to 25.5% in February – up 0.8 percentage points and equivalent to 1,290,000 mortgage holders, an increase of 41,000.
Levine said the recent fall in mortgage stress is being underpinned by both lower rates and a strong jobs market, but that borrowers remain vulnerable to any setback in income or employment.
Levine also stresses that “finally, 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 noted that more than one million new jobs since May 2022 have supported household incomes and helped moderate mortgage stress alongside three rate cuts totalling 0.75%.
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