KPMG economist Terry Rawnsley’s review of Australian Bureau of Statistics data indicates that, over the past two years, households have carried a heavier interest-payment burden than during the late 1980s, when the Reserve Bank cash rate reached 17.5 per cent. That finding may surprise borrowers who remember the double-digit rate era, but it reflects a very different housing market. Home prices, loan sizes and household leverage are all far higher than they were a generation ago.
The analysis found that total interest payments on dwellings and consumer debt fell to a low of 2.6 per cent of household income in the March quarter of 2022. Since then, rate increases and large outstanding mortgages have pushed the burden sharply higher. In the March quarter of 2026, Australian households paid $33.6 billion in interest, the fourth-highest result on record, while the repayment burden rose to 5.4 per cent of household income.
Victoria was highlighted as the state with the highest interest burden, at 6.9 per cent of household income. That is partly because weaker property prices have helped more first home buyers enter the market, but many of those buyers are now carrying large mortgages at a time when rates have climbed again.
For borrowers, the practical message is clear: rate risk needs to be managed before it becomes distress. Households should review their loan structure, check whether offset or redraw features are being used effectively, and compare their options rather than assuming their current lender remains competitive. Refinancing is not always the answer, particularly once fees, valuation issues and changed borrowing capacity are considered, but it is worth testing.
It is also a timely reminder to model repayments under different scenarios. A budget that works at today’s rate may look very different if another increase occurs, or if income is interrupted. With economists divided on the next move for rates, borrowers should focus less on predicting the Reserve Bank and more on building resilience: stronger buffers, realistic spending plans and early conversations with lenders or finance professionals if repayments are becoming difficult.
Please Note: If this information affects you or is relevant to your circumstances, seek advice from a licensed professional.
