The proportion of owner-occupier borrowers at “extreme risk” of mortgage stress has decreased slightly, suggesting an easing of interest rate pressure and some income improvements, according to national indicators of mortgage stress, which have shown marginal improvement year over year.

Low-income borrowers are a notable exception, however, as their stress levels have increased or remain elevated due to their smaller financial buffers, higher housing costs relative to income, and fewer assets. Several statistics and industry commentary show this discrepancy.

Homeowners with variable-rate debt may have different risk dynamics than the national average in Perth because of structural supply tightness (low vacancy rates), improving local demand, and robust rental markets. Perth suburbs contain both resilient and vulnerable areas, according to REIWA data and local market comments.

The pace at which mortgage stress continues to subside for the most vulnerable will depend on policy and prudential actions, including the RBA cash-rate trajectory, APRA serviceability settings, and targeted social and housing programs.  

Markets anticipate the RBA will maintain its current level of 3.6% as of late September 2025, with the possibility of a reduction later in 2025–2026 having a direct impact on borrower cash flow.

What do we mean by “mortgage stress”?

A household is considered to be experiencing “mortgage stress” if mortgage payments account for a significant portion of their income or if they are at risk of being unable to make their payments. Various study teams have varied definitions of it:

• When mortgage repayments surpass a certain amount of disposable income after basic living expenses, industry metrics frequently categorise owner-occupiers as “extreme risk”—a forward-looking indicator of risk.  
• Between mid-2024 and mid-2025, there was a slight decline in the number of people in great danger.
• Lending flows, arrears, and serviceability metrics (including loan commitments and new borrower behaviour) are tracked by ABS and banking indicators, which offer supplementary, objective perspectives.  
• Depending on the borrower cohorts, the ABS lending indicators indicate a decrease in new loan commitments in early to mid-2025, suggesting a lower origination momentum that can both alleviate and concentrate stress.

Since “mortgage stress” has multiple dimensions, including prevalence, intensity, arrears, and future risk, it is imperative to examine various datasets. Not everyone has improved because of the headline softening.

The percentage of mortgage holders who were “extremely at risk” of mortgage stress decreased from 19.7% to an anticipated one million (18.5%) in the 12 months leading up to June 2025. Over 1.5 million households, the percentage of people “at risk,” a more comprehensive indicator of stress, decreased from 30.3% in June 2024 to 27.8% in June 2025.

Real wage growth, income tax cuts, decreased interest rates, and share market gains during the previous 12 months are all factors contributing to the increase.

Uneven impact across socioeconomic groups

1. However, only households with higher incomes saw the reduction. Only the top three socioeconomic quintiles (approximately 60 per cent of Australians) experienced a decline in the percentage of mortgage holders at “extreme risk,” despite a decrease in the overall rate.

2. Stress increased among households with lower incomes. The percentage of mortgage holders who were “extremely at risk” increased by 5.2% for those in the FG quintile and by 5% for those in the E quintile.

3. Job losses and slower income growth were associated with the difference. All mortgage holders experienced a 7% increase in household income; however, only the E quintile saw a 1.5% increase, and the FG quintile saw a 2.1% increase.

4. Additionally, there were differences in employment trends: full-time employment decreased by 1.3% in the E quintile and 11.6% in the FG quintile, while remaining generally stable overall (+0.2%).

National picture: why stress is easing overall

The total measured mortgage stress has decreased due to several factors:

• Markets priced in and lenders experienced a modest rate reduction following the peak tightening.  
• For many current borrowers on fixed-to-variable transfers, this has significantly reduced their repayment obligations.  
• This improvement is supported by recent rhetoric that indicates the RBA is likely to hold before easing later in 2025–2026.
• Some households’ ability to repay debt has increased due to modest wage increases, particularly those with steady jobs and growing incomes.
• Some groups saved money throughout the pandemic and utilised it to ease repayments when interest rates increased.
• Other groups also benefited from policy and tax relief, as well as improved household savings buffers.
• Even if longer-term pressure persists, a decline in new owner-occupier commitments (ABS) results in a proportionately smaller number of freshly stressed borrowers joining the system, which can reduce immediate measured risk.

These advantages are not evenly distributed; they are concentrated among homeowners with middle-class and upper-class salaries, as well as those with sizable buffers or steady, predictable earnings.

Why mortgage stress is rising for low-income borrowers

The situation for low-income households is different. Important motivators:

• Income vulnerability & limited buffers
• Disproportionate exposure to variable costs
• Rental market and housing supply dynamics
• Changing composition of borrowers

1. Low-income individuals have less equity, less savings, and less access to credit to cushion shocks (such as illness, job loss, or increases in the cost of living). They may become stressed out by even a slight rise in household expenses or payback obligations.

2. Usually, a larger percentage of income is spent on necessities (housing, food, and energy) among lower-income households. Living expenses have increased due to recent changes in the CPI and the elimination of rebates in some areas; this lowers the portion of income available for mortgage payments. News reports about rising housing and energy prices support this.

3. There is more competition for affordable homes in tighter rental markets with low vacancy rates. Families that could have rented at a lower cost are being squeezed. According to ABS, recent quarters have shown a high rental growth rate, which limits mobility and downsizing options.

4. Marginal borrowers were able to purchase because some lenders loosened lending during the previous low-rate years. These marginal borrowers were disproportionately affected by the increase in interest rates. Although there was a slight improvement in overall metrics, Roy Morgan and comparable research suggest that the improvement is less pronounced or even reversed among the lowest income deciles.

Perth market — the local story (why Perth is different)

The following characteristics of the Perth market influence how mortgage stress manifests locally:

• Strong rental market and low vacancies
• Geographical variation across Perth suburbs
• Mining cycle links and employment dynamics
• Builder insolvencies and supply delays

1. Following the re-acceleration of the national population and local supply limits, WA/Perth had severe rental shortages. Low vacancy rates and robust rental growth are projected through 2024–2025, as indicated by REIWA data and local comments. This boosts landlord revenues but puts further financial strain on tenants and households, who must balance mortgage repayments with the pressures of the rental and housing markets.

2. Perth’s inner-city, coastal, and some outer suburban areas are not all the same. Homeowners may have increased their equity, which acts as a buffer, in many middle and outer regions where values have increased significantly.

3. Vulnerabilities are greater in periphery communities with lower income levels and longer building schedules. Suburban sentiment varies, according to local brokers; Bargoti Real Estate’s market notes indicate that demand is strong in some areas but has increased in others.

4. Cycles in the mining sector impact the Western Australian economy. Employment shocks in the mining and service industries might increase stress in specific local labour markets. Low-income households are initially impacted when employment declines; as it rises, mortgage servicing capacity increases.

5. Due to development delays and insolvencies, WA has witnessed delayed new house deliveries in various categories. This has limited supply and kept the resale market under pressure, driving up prices and rentals, which has increased housing costs for first-time buyers and lower-income tenants.

Latest policy & prudential factors shaping mortgage stress

1. Reserve Bank of Australia (RBA) policy

• Market commentary as of late September 2025 predicted that the RBA would maintain the cash rate at a level close to 3.6% during the September meeting, with possible reductions indicated later if inflation proved to be manageable.
• This would have a significant impact on variable mortgage repayments.

2. APRA and bank serviceability

• The capacity of new borrowers to qualify and the margin of safety that lenders incorporate into loans are influenced by APRA’s macroprudential approach and the mortgage buffer that lenders employ (current settings have not altered in recent commentary).  
• APRA has identified high household debt as a systemic weakness, and the organisation continues to monitor the situation.

3. Social & housing policy

• Lower-income households are impacted by federal and state programs (grants, first-home owner schemes, and targeted rental support).  
• Changes in policy, such as increasing guarantees or providing targeted rental assistance, may alleviate stress for specific groups of people (such as low-income first-time homebuyers). Still, if they are not supply-anchored, they may have unintended consequences for prices.

What the data says (selected evidence)

1. The percentage of mortgage holders categorised as being at “extreme risk” decreased from 19.7% in June 2024 to approximately 18.5% in June 2025; a more general “at risk” metric similarly reduced annually.

2. The volume and value of new home loan commitments decreased somewhat in March 2025, according to ABS Lending Indicators. While fewer new borrowers and less loan activity can mitigate headline risk, they also indicate a muted desire among buyers and possibly increased stress among those with limited financial buffers.

3. Bargoti Real Estate studies and local market pages indicate conflicting trends, including increased rental demand, occasional rising listings, and ongoing supply shortages in various market segments. In the suburbs of Perth, these influences bear results.

4. New CPI data and analysis (September 2025) indicate that housing and energy components are higher, placing a strain on the budgets of low-income households.

How mortgage stress looks by borrower cohort — a practical breakdown

1. Higher-income & well-buffered borrowers

• Characteristics: larger savings, more equity, some locked-in fixed rates, diversified income.
• Outcome: benefited most from falling variable rates and wage gains; stress eased materially.

2. Middle-income owner-occupiers

• Characteristics: moderate buffers, may be servicing larger loans, some on variable rates.
• Outcome: mixed — those who re-fixed to higher rates or with tight budgets still feel pressure, but many experienced relief as rates eased from peak.

3. Low-income owner-occupiers & early buyers (first home owners)

• Characteristics: smaller deposits, higher loan-to-value ratios, low savings buffers, and often in entry suburbs.
• Outcome: worse off or unchanged — cost-of-living increases and limited buffers mean stress rises or persists. Evidence from Roy Morgan/broker reporting highlights this cohort.

4. Investors & landlords

• Investors with strong rental yields in Perth may see incomes that offset rate increases.
• However, those with high gearing and weak yields in specific segments remain exposed.

Implications for Perth homeowners, buyers, and landlords (practical)

1. For existing homeowners (Perth)

• Verify the rate type you have: Borrowers with variable rates should plan for a 1%–2% change in interest rates each month.  
• Despite headlines claiming that stress has decreased, household financial flows differ.
• If your fixed rate is about to expire, think about the re-fixing time carefully.
• Get ahead on options, but keep in mind break costs and the shifting market.
• Establish an emergency fund first; aim for three months’ worth of essential expenses.  
• Even modest buffers can aid low-income households, but they require specialised assistance.

2. For prospective buyers (Perth)

• Use cautious serviceability assumptions when stress-testing affordability (the APRA buffer is still in force).  
• Be prepared for rates to remain stable for longer than anticipated.
• Select suburbs with resilient foundations: Bargoti Real Estate’s suburb briefs can help identify areas with strong foundations.
• Areas with robust local employment and rental demand tend to weather economic cycles more effectively.

3. For landlords/investors (Perth)

• Monitor rental yields and vacancy rates closely to ensure optimal performance.
• High yields in Perth may improve serviceability, but increased stress levels among low-income tenants could jeopardise tenant affordability.
• Leverage should be used carefully since highly geared portfolios are more susceptible to tenant turnover and rate shocks.

What lenders, regulators and policymakers are doing (and could do)

• Sustained emphasis on conducting responsible loan checks and aggressively handling arrears (interest-only switches, repayment deferrals, if applicable).
• Lenders’ willingness to engage early is essential for avoiding arrears escalation.
• APRA continues to monitor household debt and enforce macroprudential guidelines.
• New loans and the vulnerability of new borrowers are strongly impacted by its messaging and mortgage buffer settings.
• For low-income cohorts, targeted rental assistance, social housing investment, and first-home buyer aids can alleviate stress.
• Nonetheless, supply-side measures are essential to prevent the advantage from being offset by price increases.

Practical checklist for households (Perth)

For borrowers concerned about stress:

• Adjust your budget to account for a 1.5% interest shock.
• Prioritise high-interest debt payments (such as credit cards and personal loans) before increasing the mortgage principal.
• If you anticipate any issues, please get in touch with your lender as soon as possible. Proactive bargaining lowers the danger of arrears.
• Examine community financial counselling and government assistance (such as federal or WA rental or mortgage relief programs).
• Pay attention to APRA’s serviceability parameters and only consider refinancing if the long-term benefits outweigh the costs.

Case studies (unidentified composites for illustration purposes)

1. Case A: The middle-class Perth family who bought the property in 2021 with a 20% down payment. After 2024, the fixed rate changed to a variable rate. They handled repayments and fared better than anticipated in 2024–2025 following a few rate adjustments and a modest pay increase.

2. Case B: A first-time homebuyer in an outer suburb with a low-income restricted budget, high LVR, and little deposit. With no cushion, the household became one of the marginal borrowers that Roy Morgan identifies as being at risk due to rising CPI and energy bill costs, which decreased disposable income. This case illustrates how stress levels increased despite headline improvements.

Forecasts and scenarios — what to watch in the next 6–18 months

• RBA path: Variable borrowers will receive respite, and overall stress is expected to decrease further if the RBA maintains its current position and then makes cuts later in 2025–2026. Stress may persist, and the timing may change if inflation shocks occur.
• Employment and wages: The most effective structural cushion would be higher wage growth aimed at low-income groups. Stress from low income will continue if wages remain stagnant.
• Migration patterns and housing supply: Ongoing population growth and a sluggish new housing supply will keep rental markets tight, putting more strain on low-income households.
• Prudence in regulation: APRA rulings on buffer and lender policies may tighten or loosen new lending requirements, which primarily impact first-time homebuyers.

Key takeaways

• Lower effective rates and specific salary increases have contributed to a slight reduction in aggregate mortgage stress in Australia, but this conceals significant distributional disparities.
• Due to their inadequate buffers, increased living expenses, and susceptibility to unpredictable shocks, low-income borrowers are the leading group at risk.
• Due to Perth’s distinct local mix, which includes competitive rental markets, limited supply, and heterogeneous neighbourhoods, results differ from suburb to suburb; therefore, Bargoti Real Estate should prioritise micro-level analysis and focused client service.
• Practical measures that can have an immediate and significant impact include conservative affordability testing, early lender engagement, supply-side policy lobbying, and client education.

Conclusion

In Australia, mortgage stress depicts two realities.  Overall data indicate a welcome easing, on the one hand, as a result of cautious new lending, moderate wage growth, and lower rates.  Low-income borrowers, however, continue to bear an unfair share of the burden in Perth and throughout the country, as their inadequate financial buffers and rising living expenses make them more vulnerable than ever.  This disparity is exacerbated in Perth by specific factors, including a limited supply of rental properties, income inequality at the suburb level, and dependence on regional job sectors.

Bridging these realities is the way forward for Bargoti Real Estate, which will involve providing clients with clear direction, identifying vulnerable markets early, and promoting affordable and sustainable supply alternatives.  Although the overall market may be stabilising, proactive measures, careful regulation, and solid community partnerships will be necessary to ensure that all Perth households, particularly those with lower means, can prosper.

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