Borrowers have gained some breathing space from 2025 rate cuts, but Roy Morgan modelling suggests a fresh tightening cycle in 2026 could quickly push stress higher again.
Mortgage stress across Australia has eased back to its lowest point in three years, even though far more households are under pressure than before the Reserve Bank began lifting rates in 2022, new Roy Morgan research shows.
In the three months to December 2025, 24.5% of mortgage holders were classified as "at risk" of mortgage stress, down 3.4 percentage points from August and the lowest reading since January 2023.
Michele Levine (pictured), CEO of Roy Morgan, said the recent rate cuts have clearly helped.
“The latest Roy Morgan data shows mortgage stress dropping to a three year low in December 2025, down 0.2% points from November to 24.5% of mortgage holders (equivalent to 1,187,000) ‘at risk’,” Levine said in a media release. “Mortgage stress has dropped by a total of 3.4% points (down by 236,000 mortgage holders) since August 2025, the last month the Reserve Bank (RBA) cut interest rates by 0.25% to 3.6%.”
Even so, around 380,000 more borrowers are "at risk" than in May 2022, when RBA started raising the cash rate from 0.1% to a peak of 4.35% before easing back to 3.6% in 2025. Around 17.1% of mortgage holders – about 830,000 people – are now "extremely at risk", slightly above the 20‑year average of 16.3%.
Yet demand for new borrowing is still rising, with Equifax reporting secured credit demand up 14.1% year-on-year in December and mortgage enquiries jumping 17.9%, the strongest December home-loan volumes in three years.
The improvement in stress coincided with three RBA cuts in February, May, and August 2025, totalling 0.75 percentage points. But a sharp pickup in inflation in the second half of 2025 has flipped the more dovish outlook.
Levine noted that inflation has “re-accelerated from an annual rate of 1.9% in the year to June 2025… to 3.8% in December 2025”, almost doubling in five months.
“The increasing level of inflation during late 2025 led the RBA to leave interest rates unchanged at three consecutive meetings in October, November, and December and means the RBA is not likely to cut interest rates again and the most likely next move will be an increase in interest rates,” she said.
With the cash rate still at 3.6% ahead of the RBA’s first policy meeting of 2026 on 2–3 February, borrowers are craving relief from high living costs and property prices but facing growing concern that sticky inflation and a tight jobs market could keep rates higher for longer.
Roy Morgan has modelled what further hikes could mean. If the RBA lifts the cash rate by 0.25% in both February and March, taking it to 4.1%, the share of mortgage holders "at risk" would rise from 24.5% (1,187,000) in December to 25.3% (1,228,000) in February and 27.2% (1,322,000) in March.
Roy Morgan says interest rates are only part of the mortgage‑stress story, with employment and household income having the biggest impact. Its latest data show more than one in five workers are unemployed or under‑employed, but over 1.1 million jobs have been created since May 2022, helping support incomes and contain stress alongside last year’s 0.75 percentage points of RBA cuts.
For mortgage brokers, the findings highlight a delicate balance going into 2026: stress is easing and borrower demand is lifting, but any renewed tightening – or a turn in the jobs market – could rapidly push many more clients back into the "at risk" category.
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