The figures paint a picture that no borrower would want to hear about themselves.
Following its third interest hike in a row this week, new data has revealed how perilously close to the edge over a million mortgage holders in Australia find themselves.
As it increased the cash rate by 25 basis points to 4.35% on May 5, all but one member of the RBA board voted in favor of the move.
While the market did see such an announcement coming, it still had very real implications for families all over the country.
But it is not the decision regarding interest rates in itself that would worry the borrowers.
Refinancing activity, has been steadily climbing throughout the recent period, with refinances making up an increasing part of the overall volume of loan applications.
At the same time, the latest Market Pulse report reveals that despite an overall 4.1% growth in mortgage demand in Q1 2026 against Q1 2025, all of this came from refinances and upgrades, while new entrants declined by 3.5%.
Existing borrowers are scrambling to renegotiate their loans, while fewer new buyers can afford to enter the market an indication of a housing finance system under serious strain.
People are not refinancing to get a leg up. They’re refinancing to stay alive.
The stress is going up fast
Mortgage stress in Australia is on the rise with 26.8%, or some 1.45 million people, classified as “at risk” in the three months to March 2026 according to Roy Morgan’s latest research.
That number should increase dramatically. Modelling suggests the share may increase to 30.3% or 1.6 million borrowers, after the May rate rise.
There is additional pressure from other financial indicators.
Personal loans increased by 3.1 per cent during the first quarter despite lower credit card arrears and mortgage arrears.
Rising personal loans may be seen as evidence that people are taking loans to meet their expenses.
Inflation stood at 4.6% during the year ending in March due to sharply rising petrol prices, mainly as a result of the war in the Middle East and blockage in the Strait of Hormuz.
The RBA predicted that “inflation will remain above target for some time,” leaving the possibility of further hikes.
For borrowers who entered the market in the record low rate era of 2020 and 2021, the cumulative pain has been huge.
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Industry figures say lenders serviceability buffers are now locking some borrowers in with their existing provider because they can’t pass the stress test required to refinance elsewhere.
The CEO of the Mortgage and Finance Association of Australia, Anja Pannek, said that this new development was “bad news for people who have seen increased repayments and increased costs across the board.”
According to Westpac, the most aggressive of the major banks, another two increases will occur in June and August, resulting in a cash rate of 4.85%.
“If this does eventuate, Roy Morgan has found that the proportion of borrowers at risk of mortgage stress will be at its highest rate since the Global Financial Crisis of 2008”.
The rise in refinance activity does not indicate a strong and competitive lending environment rather, it is an early warning signal of stressed homeownership.
